Bangkok--Dec 13--Moody's Asia Pacific
Moody's Investors Service has affirmed its Baa3 issuer rating for PTT Chemical Public Company Limited (PTT Chemical), the surviving entity of the merger between Thai Olefins Public Company Ltd (TOC) and National Petrochemical Public Company Limited (NPC). At the same time, Moody's has affirmed its Baa3 rating for the US$300 million bonds previously issued by TOC, and which have now been transferred to PTT Chemical. The ratings outlook is stable.
The affirmation reflects Moody's opinion that the amalgamation of TOC and NPC is positive overall, but will not result in any rating impact.
Moody's had earlier assigned a Baa3 issuer rating and a Baa3 bond rating
to TOC in June 2005.
The ratings continue to reflect the application of Joint Default Analysis
(JDA) to Government Related Issuers (GRI) in view of PTT Chemical's 50.03% shareholding by PTT, which is in turn a GRI. In accordance with this methodology, the ratings of PTT Chemical reflect the combination of the following inputs:
1) baseline credit assessment of 5 (on a scale of 1 to 6, where 1 represents lowest credit risk);
2) A2 local currency issuer rating of PTT, the support provider;
3) medium support and;
4) medium dependence.
The base line credit assessment remains at 5 post merger. The transaction
is positive overall since it has created Thailand's largest olefins producer, potentially ranking fifth in Asia in terms of installed capacity. The merger has also provided a clearer alignment for the olefins business of PTT and created a single flagship olefins company for the PTT group. Nevertheless, such benefits are partially offset by PTT Chemical's expected large capital expenditure over the next few years and its rising level of debt towards 2008. Post merger and over the medium term, the credit metrics of PTT Chemical are expected to remain appropriate for the current rating level.
Support and dependency remain at the medium levels. The medium dependence recognizes PTT Chemical's close business integration and relationship
with PTT. Medium support takes into account PTT's majority ownership in PTT Chemical and the potential support from PTT.
The bond rating has not factored in legal subordination as Moody's anticipates PTT Chemical will lower its secured debt to total debt ratio from the current 25% level to below 15% by 2007, following the paying down of certain secured debentures.
PTT Chemical is now the largest olefins producer in Thailand. It has a
nameplate olefins capacity of 1,523 kta -- 1,146 kta for ethylene and 377 kta for propylene.
Hong Kong
Helen Li
Analyst
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 2916-1121
Hong Kong
Gary Lau
Senior Vice President
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 2916-1121 End.