Bangkok--10 Aug--TRIS Rating
TRIS Rating Co., Ltd. has affirmed the “AA” rating with “stable” outlook for the Bt4,000 million depository receipts on The Bangchak Petroleum PLC’s (BCP) subordinated convertible debentures (BCP141A) of Siam DR Co., Ltd. (SIAMDR). The rating reflects the credit support, in terms of principal protection, provided by the Ministry of Finance (MOF) to buy back the issue at the original offering price should the underlying issuer, BCP, be unable to make its scheduled payments on time, the underlying issuer’s credit quality, and the additional security elements embedded into the transaction structure itself.
The “stable” outlook for SIAMDR’s depository receipts derives from the principal protection from the MOF and the credit quality of BCP itself. The rating of this issue may be revised if there is a significant change in BCP’s credit quality.
TRIS Rating reported that BCP’s credit quality is related to the support from PTT PLC (PTT) and the progress of BCP’s refinery improvement programs. However, these benefits are partially offset by the constraints of BCP’s existing refinery and the inherent fluctuations in oil prices and gross refining margins. The credit assessment also takes into consideration BCP’s improved capital structure, following its financial restructuring and the good prospects for oil demand.
TRIS Rating said, BCP’s operating performance in 2005 and the first quarter of 2006 was satisfactory. Although its refinery utilization reduced from 74% in 2004 to approximately 50% in 2005 and the first quarter of 2006, BCP’s gross refining margin averaged US$3.45 per barrel, double the margin obtained in 2004. However, BCP’s marketing margin declined significantly from Bt1.30/liter in 2004 to Bt0.72/liter in 2005 before improving slightly to Bt0.98/liter in the first quarter of 2006. BCP’s financial performance in 2005 remained favorable as its operating margin remained at the 2004 level of 4.7%. In the first quarter of 2006, operating margin declined to 2.38%.
A US$378 million investment in BCP’s new hydrocracker is expected to alleviate the company’s refinery limitations and yield more highly-valued refined products. With a conservative financing scheme of 56% debt financing for the new cracker project, BCP’s leverage is expected to increase slightly during the construction period, said TRIS Rating.
Siam DR Co., Ltd. (SIAMDR)
Issue Rating:
BCP141A: Bt4,000 million depository receipts on The Bangchak Petroleum PLC’s subordinated convertible debentures due 2014 Affirmed at AA
Rating Outlook: Stable