Bangkok--8 Feb--Fitch Ratings(Thailand)
Fitch Ratings (Thailand) Limited has today downgraded the National Long-term senior unsecured rating of Thailand’s Thoresen Thai Agencies Public Company Limited (“TTA”) to ‘BBB+(tha)’ from ‘A-(tha)’ (A minus(tha)). The Outlook on the rating is Stable.
The rating downgrade is based on the refinancing plan deferral, which will result in the level of secured debt remaining relatively high for the company. This could impair the recovery prospects of unsecured debt in the event of a default. TTA recently announced that the planned issuance of up to THB8.0 billion unsecured debentures to refinance its entire portfolio of secured vessel loans had been postponed indefinitely, due to the prevailing high refinancing costs. The initial rating assigned by Fitch in September 2006 was based on this refinancing plan and a significant reduction in the level of secured debt. At FYE06 (the fiscal year ended 30 September 2006), TTA had consolidated debt of THB9.0bn, all of which was senior secured debt. The level of secured debt at FYE06 was relatively high at around 39% of total assets and 43% of total capitalisation. Conversely, if this refinancing plan is resumed and completed at a later date, it could trigger a rating upgrade.
The rating reflects TTA’s established position in the dry bulk shipping market in Thailand, the diversified fleet employment strategy, and the relatively low-cost fleet expansion between 2003 and 2005. With its current fleet of 45 owned vessels, established service network, frequent sailings and efficient logistics management, TTA is one of the largest dry bulk liner services on the rapidly expanding routes from Southeast Asia and China to the Middle East. The rating also factors in the fleet’s relatively high weighted average age, which generally results in lower operating efficiency and increased operating and reinvestment risks. Credit concerns include the cyclical nature of the shipping industry and volatility of freight rates, which is partly mitigated by TTA’s relatively conservative financial profile.
TTA’s financial position remains strong. At FYE06, TTA’s net adjusted debt/last-12-month EBITDAR remained unchanged from the nine-month period ended 30 June 2006 at 1.8x, although it slightly rose from 1.0x to1.2x during FY04-FY05. In terms of the FY06 financial performance, TTA’s overall operating performance was in line with expectations. Its consolidated sales improved 8% yoy to THB16.0bn in FY06, while its EBITDAR fell 25% yoy to THB6.0bn, in light of weakening freight rates.
Contacts: Soamsiri Chadavadh +662 655 4753; Lertchai Kochareonrattanakul +662 655 4760; Vincent Milton +662 655 4759
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such 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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