Bangkok--23 Nov--Moody's Investors
Approximately US$450 million in debt securities affected
Moody's Investors Service has assigned a provisional (P)B1 corporate family rating to True Move Company Limited (True Move) and a (P)B2 senior unsecured rating to the company's proposed US$450 million 7-year notes issue (the Notes). The ratings outlook is negative.
The proceeds of the bonds will be used to partially refinance True Move's existing secured domestic bonds. Moody's expects to affirm the ratings and remove them from their provisional status upon completion of the bond issuance and reduction of existing secured debt.
"The (P)B2 rating reflects True Move's established network and subscriber base, and the ongoing growth evident in the Thai cellular market," says Charles Macgregor, a Moody's VP/Senior Credit Officer, adding "The rating also takes into account close links with True Corp (Ba3/negative) - its 93.4% parent - given True Move's integral operational position within the group."
"On the other hand, such credit strengths are offset by True Move's distant third-ranking market position, the increasingly competitive nature of the cellular market and its high financial leverage, all of which may impair its ability to fully execute its business plan, as well as its exposure to potential regulatory challenges in the Thai cellular market," says Macgregor, Moody's lead analyst for True Move.
In accordance with Moody's global rating methodology for telecommunications companies (please refer to Rating Methodology: Global Telecommunications Industry, February 2005), True Move's overall performance measurements, relative to the rating methodology, indicate a Ba3 rating category. The (P)B1 rating, however, considers the risks of execution and access to capital with respect to True Move's capex spending in the next 2 years.
Structurally, the proposed Notes will be junior to secured credit facilities and the senior unsecured rating has been notched down to (P)B2 from the corporate family rating of (P)B1 to reflect this effective subordination. The notching may be removed if the company was to reduce secured debt to below $200 million, at which level the company's secured debt/ total assets would be at approximately 15%.
The rating outlook is negative, based on concern that True Move may not be able to comply with lenders' financial covenants after March 31, 2007 - including a ratio of net debt to EBITDA below 4.5 times. The rating could stabilise if True Move seems likely to be able to comply with lenders financial covenants. Upward rating pressure could emerge if True Move appropriately manages its growth strategy in cellular operations, such that the following metrics are achieved on a sustainable basis by both True Move and True Corp: adjusted debt/EBITDA below 4x, free cash flow/adjusted debt above 5%, and (EBITDA-capex)/Interest of 1.5x.
The ratings could undergo downward pressure if a) True Move experiences greater competition and further liberalization -- thereby negating its ability to ultimately sustain an adjusted debt/EBITDA ratio of below 5x, b) it consistently fails to achieve a (EBITDA-capex)/Interest ratio of above 1.0x, and/or c) True Move breaches its lenders' financial covenants. Furthermore, a diminution in the credit profile of TRUE Corp would also be negative for the rating. This may be evidenced by a ratio of Debt/EBITDA persisting above 5x or a (EBITDA-capex)/Interest ratio of below 1.0x.
Trove Move Company Limited (formerly TA Orange), headquartered in Bangkok, Thailand, is that country's third largest mobile telecommunications operator.
Sydney
Charles F. Macgregor
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Pty Ltd
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100
Hong Kong
Gary Lau
Senior Vice President
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 2916-1121