Bangkok--Oct 26--TRIS Rating
TRIS Rating Co., Ltd. has affirmed the rating of Nestl (Thai) Ltd.’s (NTH or Issuer) Bt5,000 million guaranteed debentures (NTH086A) at “AAA” with “stable” outlook. These debentures are guaranteed unconditionally and irrevocably by Nestl S.A. (Guarantor), which owns 100% of NTH. The issue rating is based on the credit quality of the Guarantor, which is rated “AAA” with “negative” outlook by Standard and Poor’s (S&P) and “Aaa” with “stable” outlook improved from “negative” in April 2005 by Moody’s Investors Service (Moody’s). The Guarantor has agreed to guarantee the payment of a maximum amount equal to Bt5,500 million. Although the Guarantor shall not be liable for the guaranteed debentures in the event that the intervention of any government agency of Thailand expropriates or nationalizes the assets of the Issuer, TRIS Rating believes that such an event is highly unlikely.
The “stable” outlook of NTH reflects the extremely strong credit profile of the Guarantor, Nestl S.A., which is rated “AAA” and “Aaa” by S&P and Moody’s, respectively.
TRIS Rating reported that under the guarantee, the Guarantor irrevocably and unconditionally guarantees, as joint and several Guarantor under Article 496 of the Swiss Code of Obligations, to make payment on demand to the debentureholders’ representatives of the principal and any other amounts payable by the Issuer up to a maximum amount of Bt5,500 million. This maximum amount covers the overdue principal, overdue interest, and any other amounts owed with respect to the debentures. However, the Guarantor will not be liable to pay any amount pursuant to this guarantee to the extent that the Issuer’s failure to pay has resulted from the occurrence of: the expropriation or nationalization by any government agency of Thailand equal to or exceeding 10% of the consolidated fixed assets of the Issuer and its subsidiaries; or the expropriation or nationalization that has the effect of preventing the Issuer and its subsidiaries from carrying on business; or, the transfer by intervention from any government agency of Thailand of the majority shareholding in, or control over, the Issuer to an entity that is not a member of the Nestl Group. This guarantee is governed by Swiss law. The place of jurisdiction shall be Vevey, Switzerland.
TRIS Rating said that Nestl S.A., the ultimate holding company of the Nestl Group, is a public company listed on the Swiss Exchange. Nestl is the market leader in the branded and packaged food industry. S&P and Moody’s have rated Nestl S.A. at “AAA” and “Aaa”, respectively. In the view of S&P, the rating for Nestl S.A. reflects the group’s leading position in branded and packaged food in the global marketplace, strong and stable cash generation, an extremely diversified product portfolio, a geographically-diverse customer base and management’s conservative financial policy. The financial profile of Nestl Group has improved significantly in 2004 after it deteriorated as a result of acquisitions, especially Ralston Purina Co., Ltd. in 2001. However, the “negative” outlook from S&P reflects its belief that Nestl S.A. needs to further improve its debt measures, and needs to achieve and then maintain funds from operations (FFO) coverage ratio of net debt adjusted for operating leases and postretirement liability of about 90%. End.