Bangkok--Jul 27--Moody's Asia Pacific
Moody's Investors Service has affirmed its Baa3 rating for the US$300 million bonds issued by The Aromatics (Thailand) Public Company Ltd (ATC) following completion of the issuance.
At the same time, Moody's has affirmed its Baa3 issuer rating for ATC and removed both ratings from their provisional status. The ratings outlook is stable.
The Baa3 ratings reflects the application of Moody's new rating
methodology for government-related issuers ("GRIs"). Please refer to Moody's rating methodology entitled "The Application of Joint Default Analysis to Government-Related Issuers", published in April 2005, and its accompanying press release. Please also refer to Moody's special comment entitled "Rating Government-Related Entities in Asia-Pacific" for a detailed discussion of the application of the GRI rating methodology to corporate issuers in Asia-Pacific.
In accordance with Moody's GRI rating methodology, the ratings of ATC
reflect the combination of the following inputs:
- Baseline credit assessment of 5 (on a scale of 1 to 6, where 1 represents lowest credit risk)
- A2 local currency rating of PTT
- High dependence
- Medium support
The baseline credit assessment of 5 is underpinned by ATC's improved cost structure, strong operating structure of its business with PTT acting as
the primary sales and purchase counterparty under long-term agreements, and the positive outlook for the petrochemicals industry over the next 12-18 months. At the same time, the rating also reflects the cyclicality nature of the aromatics industry, the large capex for ARO II and its impact on the credit metrics of ATC, relatively small scale of operations and short operating track record.
High dependence recognizes the close business integration between ATC and PTT, in particular, PTT's role as the major feedstock supplier and an intermediary off-taker of ATC (over 90% of ATC's sales is conducted through PTT).
Medium support takes into account PTT's 46% ownership in ATC, as well as
its financial support to ATC in the form of a subordinated shareholder loan and committed trade credit facility.
The ratings would undergo an upgrade if ATC succeeds in implementing its
ARO II project as planned, and demonstrates a track record for effectively managing its business through the next industry cycle.
On the other hand, the ratings would experience downward pressure if a
material downturn in the petrochemicals industry occurs, or the company undertakes further aggressive capex plans. Furthermore, a material reduction of PTT's ownership in ATC or a material change to the supply and off-take agreements between the two companies would have a negative impact on the ratings. The ratings would also undergo a downgrade if ATC were to breach any one of its loan covenants and thereby trigger a cross-default.
ATC is a Thai based petrochemical company involved in the production of
benzene, paraxylene, orthoxylene and mixed xylenes including by-products like raffinate, light naphtha, hydrogen-rich gas, LPG gas, condensate residue and heavy aromatics. Following the completion of the de-bottlenecking Project Stage 2 in April 2004, ATC has a nameplate aromatic capacity of 1,101 KTPA.
Hong Kong
Helen Li
Analyst
Corporate Finance Group
Moody's Asia Pacific Ltd.
Telephone: 852-2509-0200
Facsimile: 852-2509-0165
Sydney
Brian Cahill
Managing Director
Corporate Finance Group
Moody's Investors Service Pty Ltd
612 9270 8100 End.