Bangkok--Dec 1--Moody's Asia Pacific
Moody's Investor Services has assigned a B3 corporate family rating to Advance Agro Public Company Limited (AA) with a stable outlook.
The B3 rating reflects AA's high financial leverage and limited cushion
for withstanding the volatile nature of commodity product prices. Furthermore, the rating reflects AA's technical default status on its 2007 notes. However, Moody's understands AA is current on its coupon payments, and draws comfort from the fact that no request has emerged from bondholders for an acceleration of payments. Nevertheless, such failure to comply with covenants prompts concerns over corporate governance.
On the other hand, the rating is supported by AA's competitive cost position, its brand development with good quality products and track record for generating positive free cash flow.
Upward rating pressure would evolve if there is: 1) an improvement in its liquidity position, including reduced reliance on short-term funding; 2)
establishment of a track record to comply with its bond covenants; and 3)
maintenance of its current financial profile, including the ability to generate free cash flow and maintain TD/EBITDA of lower than 4.0x - 4.5x on a sustainable basis.
On the other hand, the rating would come under downward pressure if there is: 1) an acceleration of repayments from bondholders; 2) upstreaming of
funds to support other group companies; or 3) a material downward trend in the paper market and an aggressive debt-funded capex plan, resulting in TD/EBITDA of above 5.5x -- 6.0x and EBITDA/Int of below 1.5x.
Advance Agro (AA), headquartered in Bangkok, Thailand, is an integrated
producer of pulp, uncoated free sheet, and coated paper.
For more information please contact:
Hong Kong
Ken Chan
Analyst
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 2916-1121
Sydney
Brian Cahill
Managing Director
Corporate Finance Group
Moody's Investors Service Pty Ltd
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100 End.