Bangkok--Oct 18--Fitch Ratings
Fitch Ratings (Thailand) Limited today downgraded the National Long-term ratings on the three tranches of Property Perfect Public Company Limited’s (“PF”) secured debentures to ‘BBB-(tha)’ (BBB minus(tha)) from ‘BBB(tha)’. The three tranches total THB1.55 billion, and mature February 2006, August 2006 and February 2007, respectively. At the same time, Fitch assigned expected National Long-term ratings of ‘BBB-(tha)’ (BBB minus(tha)) to PF’s new secured debentures of up to THB450 million, maturing April 2008. The Outlook on all the ratings remains Negative. The new bond issue is secured by land with an expected value-to-loan ratio of 152% (i.e. an LVR (“Loan-to-Value ratio”) of 65.8%. The proceeds from the debentures are to be used for PF’s land acquisition for future development.
The rating downgrade reflects PF’s further weakening in financial leverage and worse-than-expected earnings growth, which has reduced the company’s financial flexibility. PF’s net debt to EBITDA continued to weaken to 9.3x at end-1H05 (2004; 8.2x and 2003; 4.4x), on the back of its project expansion, land acquisition and a dividend payout. While PF reported improved sales performance of 36% yoy to THB2.1bn in 1H05, its earnings growth was hurt by rising construction material costs, which put pressure on margins. EBITDA slightly decreased by 2% yoy to THB305m in 1H05.
PF is also exposed to other operational risks including an industry-wide slowdown, rising interest rates, intensified competition, construction delays and inventory risks. Given the non-recurring nature of its project cash flows and high leverage, PF’s liquidity management is also a concern. PF’s net debt to EBITDA ratio is likely to remain weak, although reduced land acquisition and project expansion, together with expected stronger EBITDA growth, should help improve leverage to a more moderate level in 2007.
The Negative Outlook reflects the company’s vulnerability to a further slowdown in the industry. In order to stabilise the rating Outlook, a sustainable sales growth and an improved leverage over the next twelve months will be required.
Established in 1985, PF is the large-scale pre-built SDH development in Bangkok. PF’s creditors currently hold about 90% of the company’s stock due to its restructuring following the 1997 financial crisis.
CONTACT:
Wasant Polcharoen, Lertchai Kochareonrattanakul,
Vincent Milton, Tel: +662 655 4755.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such 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.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. End.