Bangkok--22 Dec--Fitch Ratings-
Fitch Ratings (Thailand) Limited has today affirmed the National Long-term ‘AA(tha)’ ratings on three series of guaranteed bonds issued by Holcim Capital (Thailand) Limited with Series I due 2008, Series II due 2010 and Series III due 2012, altogether amounting to THB7.6 billion. The Outlook on the ratings is Stable.
The National ratings are entirely based on the irrevocable and unconditional guarantee provided by Swiss-based Holcim Ltd (“Holcim”, rated ‘BBB+’/Stable/‘F2’) of up to THB8.8bn, which fully covers the obligations under the guaranteed bonds. Holcim is now rated two notches below Thailand’s international Long-term local currency Issuer Default rating of ‘A’ with a Stable Outlook. This, in turn, results in the National ratings of the guaranteed bonds being two notches below Thailand’s sovereign National rating of ‘AAA(tha)’. Any rating divergence between Holcim and Thailand may affect the issue’s National ratings. In addition, a one notch change in the International rating could result in change of greater than one notch in the National rating.
The rating of the guarantor, Holcim, reflects its strong international market positions and diversified product portfolio. Holcim is one of the world’s largest producers and distributors of cement and aggregate, with sales of more than CHF18 billion and a cement capacity of more than 160 million tonnes at end-2005. The ratings also reflect Holcim’s superior geographical diversification with a high penetration in emerging markets i.e. Latin America, Africa Middle East, Central/Eastern Europe and South East Asia, which offer more dynamic growth and higher margins than mature markets. The geographic expansion has been a key feature of its well-executed strategy of the past few decades and has helped mitigate cyclicality in recent years. The ratings are also based on Holcim’s strong cash flow generation capability, its above-sector-average operating EBITDAR margins and its adequate capital structure supported by its shareholders’ commitment to maintaining a sound financial profile. While Holcim’s credit metrics deteriorated in 2005 as the company raised debt to finance recent acquisitions, the CHF1.7bn capital increase at the end of May 2006 helped restore its financial profile. Fitch expects the company to continue to generate free cash flow from operations, which should allow it to progressively reduce debt, if a moderate acquisition spending strategy is carried out. Meanwhile, liquidity is strong given a substantial cash balance and sizable unutilised committed credit facilities.
Holcim Capital (Thailand) Limited is a privately-held company in the group of Holcim, incorporated in Thailand in 1998. Its existing shareholders are Thai Roc-Cem Limited (holding 51%) and Holderfin B.V. Netherlands (holding 49%). Thai Roc-Cem Limited is 49% owned by Holcim Participations (Thailand) Limited, a 100%-owned subsidiary of Holderfin B.V., which in turn is wholly-owned by Holcim — the guarantor. The main objective of setting up Holcim Capital (Thailand) Limited is to raise funds and provide financial support to companies in the group. Since its inception, Holcim Capital (Thailand) Limited has limited business activities and has no recurring income. As the proceeds from the guaranteed bonds were lent to Thai Roc-Cem Limited and Holcim Participations (Thailand) Limited, cash flows to service interest and principal obligations under the guaranteed bonds come from interest received and inter-company loans repayment from these two borrowers. Given its status as Holcim’s investment arm in Thailand, Thai Roc-Cem Limited’s main cash flow stream is dividend received from its holding of 31% in Siam City Cement Plc — the second-largest cement producer in Thailand. Meanwhile, as a shareholder in Thai Roc-Cem Limited, Holcim Participations (Thailand) Limited relies on dividend upstream from the former as a key source of cash flow generation. Nevertheless, investors should note that the ratings of the bonds are entirely based on the guarantee mentioned above.
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.
CONTACT: Wasant Polcharoen, Vincent Milton; Bangkok, Tel: +662 655 4755; Elisabetta Zorzi, Milan, Tel: +39 02 8790 87213
Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, www.fitchratings.com . Published ratings, criteria and methodologies are available from this site, at all times. Fitch’s code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the ‘Code of Conduct’ section of this site.