Bangkok--14 Jul--TRIS Rating
TRIS Rating Co., Ltd. has affirmed “AAA” ratings with “stable” outlook to the guaranteed debentures (UTT07DA, UTT083A) of Unilever Thai Trading Ltd. (UTT or Issuer). These debentures are guaranteed by UTT’s ultimate parent company, Unilever N.V. (Guarantor), a company rated “A+” and “A1” by Standard & Poor’s (S&P) and Moody’s Investors Service (Moody’s), respectively. The issue ratings continue to reflect the credit quality of the Guarantor. Although the Guarantor shall not be liable for the guaranteed debentures in the event that the Issuer is prevented from the punctual payment of any moneys payable because of the intervention of any Thai government agency or the expropriation or nationalization of the assets of the Issuer, TRIS Rating believes that the likelihood of such an event is small.
The “stable” outlook of UTT’s debentures is derived from the credit profile of UTT’s Guarantor, who was assigned the “A+/Stable” rating and outlook by S&P and the “A1/Negative” rating and outlook by Moody’s. The Guarantor’s outlook, based on product mix, more active brand management, and a cost cutting program, should benefit the Unilever Group's margins and generate steadily increasing levels of cash flow. This cash flow will enable Unilever N.V. to gradually bring its financial profile in line with that factored into the ratings.
TRIS Rating reported that, under the guarantee agreement, the Guarantor irrevocably and unconditionally guarantees to make full and punctual payment of any amount due as if it were the principal debtor. However, the Guarantor will not be liable to pay any amount pursuant to this guarantee to the extent that UTT’s failure to pay has resulted from the occurrence of: any intervention by any government agency of Thailand that prevents such payment by causing UTT or the Issuer to be unable to transfer money or to convert foreign currency to the currency of payment, the expropriation or nationalization by any government agency of Thailand of any of the assets of the Issuer or its subsidiaries for a certain amount and the transfer by intervention from any government agency of Thailand to an entity that is not a member of the Guarantor’s group. The guarantee’s terms, which specify the unconditional and irrevocable payment with waiving notice of acceptance by the Guarantor, will continue and remain in operation until all moneys owed by the Issuer in respect of the debentures is paid. The guarantee agreement is governed by the laws of England.
TRIS Rating said that Unilever N.V. is a public company registered in the Netherlands, while Unilever PLC is a public company registered in England (together the two parent companies are referred to as the “Unilever Group” or simply “Unilever”). The two companies practically operate as a single entity. As they have the same directors and are linked by a series of agreements, the two companies are currently viewed to have equal credit standings, “A+” from S&P and “A1” from Moody’s. Unilever’s ratings reflect its diversified leading brand portfolio and geographic diversity. The ratings also take into account the strength of Unilever’s distribution channels in developing markets, which have a high growth. Nevertheless, these supporting factors are partially offset by Unilever’s financial profile, which is relatively weak within the rating category, and relatively low profitability compared with its peers. The supporting factors are also considered to be constrained by slow growth rates in Unilever’s mature markets (European market) and intensified competition in the worldwide consumer products industry, which challenges Unilever to sustain its market shares and margins.
TRIS Rating said, Unilever maintained credit ratings of “AAA” and “Aaa” from S&P and Moody’s, respectively, for a long time before being downgraded to “A+” and “A1” in 2000 because of high leverage and weakening cash flow adequacy following a number of acquisitions in 2000, especially the debt-financed acquisition of Bestfoods. However, even though total debt as a percentage of capitalization has been gradually reduced from recent years, it remained high at 58.5 % at the end of 2005. Given that there are no additional major acquisitions and conservative financial policy remains in place, Unilever’s ratings are not expected to change.
On 7 November 2005, UTT was amalgamated with Unilever Bestfoods (Thailand) Ltd. (UBF). Both companies are subsidiaries of the Guarantor. Consent was given by the Guarantor to make the transfer of debt to the amalgamated company deem to be a novation. It is agreed that the guarantee condition will still be in force, said TRIS Rating.
Unilever Thai Trading Ltd. (UTT)
Issue Ratings:
UTT07DA: Bt6,500 million guaranteed debentures due 2007 Affirmed at “AAA”
UTT083A: Bt4,000 million guaranteed debentures due 2008 Affirmed at “AAA” Rating
Outlook: Stable
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