Bangkok--Feb 10--Moody's
Moody's Investors Service has assigned its provisional (P)B1 rating to G Steel Public Company Ltd's (G Steel) proposed senior unsecured bond, the proceeds of which are intended to fund the company's de-bottlenecking program. At the same time, Moody's has affirmed the company's B1 corporate family rating. The ratings
outlook is stable.
Moody's expects to affirm the (P)B1 rating and remove it from its
provisional status upon completion of the bond issuance. The additional issuance will be consolidated to form a single series with the existing US$100 million senior unsecured bond due 2010.
Moody's notes the significant drop in hot roll coil (HRC) prices and expects this trend to continue, albeit at a moderating pace in the near term, thereby weakening G Steel's cash generation ability and pressure its liquidity profile. "However, the US$61 million in proceeds from the company's recently completed IPO along with the proposed bond issuance will support its liquidity profile and be sufficient to fund its planned capex", says Moody's lead analyst Angela Choi. Moody's draws further comfort that capex will be paid out in progressive payments, while debt obligations in coming years are minimal.
"Upside potential for the ratings will be limited in the next 2 years"
Choi says, adding that "the successful completion of the de-bottlenecking program currently underway and establishment of a track record to improve its working capital management and profitability throughout the industry cycle would be positive for the rating over time".
On the other hand, downward rating pressure could emerge if 1) its
operating and liquidity profiles weaken further due to poor management of working capital, 2) the proposed bond issuance does not proceed and G Steel fails to raise additional funding for its de-bottlenecking program in the next 12 months, and 3) the decreasing trend for HRC prices persists, such that steel prices fall beyond Moody's expectations.
G Steel Public Company Ltd, headquartered in Bangkok, Thailand, produces
HRC in different grades and gauges. G Steel is a stand-alone operating entity with no related group companies.
Hong Kong
Angela Choi
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.