Bangkok--Mar 3--Moody's Asia
Moody's Investors Service has affirmed its B1 rating for the senior unsecured bond issued by G Steel Public Company Limited (G Steel) and removed the rating from its provisional status.
This rating action follows the completion of US$70 million issuance which forms a single series with the US$100 million senior unsecured bond due 2010 issued in September 2005. The additional bond proceeds are intended to fund the company's de-bottlenecking program as well as for general corporate purposes. The ratings outlook is stable.
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 bond proceeds will support its liquidity profile and be sufficient to fund its planned capex", says Moody's lead analyst Angela Choi.
"Upside potential for the rating 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 de-bottlenecking program does not go as planned with substantial cost overrun and delay in completion; and 3) the decreasing trend for HRC prices persists, such that steel prices fall beyond Moody's expectations. The key credit metrics that Moody's would consider for a downgrade includes average EBIT/interest < 2.5x over the cycle.
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.