Bangkok--28 Aug--Fitch Ratings
Fitch Ratings (Thailand) Limited has today affirmed the ratings of PTT Chemical Plc. (“PTTCH”) following PTTCH’s announcement of its acquisition of the remaining 50% stake in PTT Polyethylene Co.,Ltd. (“PTTPE”) and Bangkok Polyethylene Plc (“BPE”) from PTT Plc (“PTT”). PTTCH’s ratings were affirmed as follows:
- National Long-term rating at ‘A+(tha)’ with a Stable Outlook
- National Short-term rating at ‘F1(tha)’
- senior unsecured debentures at ‘A+(tha)
- secured debentures at ‘AA-(tha)’ (AA minus(tha))
The acquisition, which would result in PTTCH’s full ownership in PTTPE and BPE, is part of PTT group’s strategy to use PTTCH as its single flagship company in the gas-based olefins business. The share purchase, which is estimated to cost approximately THB3.75 billion, together with the additional investment from consolidating PTTPE’s and BPE’s financial statements into PTTCH’s financial statements, would increase PTTCH’s capex to THB97bn during 2006 to 2010, from THB59bn before the acquisition. As the additional capex will be about 70% funded by THB28bn new equity from PTTCH’s right issue (which was announced at the same time as the share acquisition), PTTCH’s financial position should not be significantly affected by this additional investment. PTTCH is expected to be able to maintain its financial leverage at a relatively comfortable level of less than 2.0x for its net debt/EBITDA ratio, consistent with PTT’s financial guidelines.
The ratings of PTTCH are based on its strategic significance to PTT as the latter’s single flagship company in the gas-based olefins business, the strong support from PTT, its large scale of operations, its favourable feedstock arrangement as well as its high level of production integration via downstream expansions. The company’s forward integration into a variety of downstream products is expected to support earnings growth and reduce earnings volatility in the long term. PTTCH’s ratings are also underpinned by its relatively strong financial position. Credit concerns include the cyclical nature of the petrochemicals industry, execution risks arising from new downstream projects, its large investment plans amid a less favourable operating environment as well as its relatively high exposure to a single market.
Contact: Orawan Karoonkornsakul, Lertchai Kochareonrattanakul, Vincent Milton; Bangkok, Tel: +662 655 4755.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
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