Bangkok--Mar 14--Fitch Ratings
Fitch Ratings (Thailand) Limited has placed the National Long-term ‘AA-(tha)’ (AA minus(tha)) and National Short-term ‘F1+(tha)’ ratings on National Petrochemical Plc’s (“NPC”) senior unsecured debts on Rating Watch Negative. At the same time, the agency has placed the National Long-term ‘A-(tha)’ (A minus(tha)) rating of Thai Olefins Plc’s (“TOC”) secured debentures on Rating Watch Positive. The placing of NPC and TOC on Rating Watch is due to the possible merger between the two companies.
While NPC and TOC have so far made no announcement on the possible merger, PTT Plc (“PTT”), the major shareholder of NPC (37.9%) and TOC (49%), is now in the process of undertaking a feasibility study on the merger. Fitch believes that the merger proposal reflects PTT’s desire to consolidate its investments in the petrochemical sector in order to minimise investment duplications as well as to achieve synergies between the operations of its two olefins producers.
The Rating Watch Negative on NPC is based on the possibility that, if the merger proceeds, the merged entity may be more highly leveraged as compared to NPC’s current credit metrics. Conversely, the Rating Watch Positive on TOC is due to the possibility that the leverage of the merged entity may be more moderate than is currently the case for TOC. Both NPC and TOC have reported record high operating cash flows in 2004, mainly on the back of strong product prices. On a pro-forma basis using end-2004 figures, Fitch estimates total debt/EBITDA and net debt/EBITDA of the merged entity to be at 0.9x (NPC: 0.5x, TOC: 1.3x) and 0.4x (NPC: net cash, TOC: 0.8x), respectively.
Nonetheless, the rating implications (if any) are still dependent on the feasibility study and final shareholder approval, as well as the capital and shareholding structure of the merged entity, the extent of synergies achieved on future operations and other costs associated with the merger. Fitch anticipates resolving the Rating Watch on NPC and TOC once the merger proposal details are finalised.
Contact: Pimolpa Simaroj, Orawan Karoonkornsakul, Lertchai Kochareonrattanakul, Vincent Milton; Bangkok, Tel: +662 655 4755.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable. End.