Bangkok--25 Sep--TRIS Rating TRIS Rating Co., Ltd. has assigned a “A-” rating to the proposed up to Bt1,300 million senior debentures of Central Plaza Hotel PLC (CENTEL). At the same time, TRIS Rating has affirmed the company and issue ratings of CENTEL at “A-”. The rating outlook remains “stable”. The ratings reflect CENTEL’s diversified cash flow from the hotel and quick service restaurant (QSR) businesses, its strong position in the QSR business, and the good quality of certain hotel properties in its portfolio. The ratings also take into account support from the Central Group. However, these strengths are partially offset by the seasonal nature of the hotel industry, which is sensitive to external factors, and the highly-competitive and low-margin nature of the QSR industry. Along with the negative impact of the continually strengthening baht on hotel operations, additional concerns are CENTEL’s continuing expansion in the hotel business, which requires substantial investment that will drive higher leverage during the next three years, and the risk that the leasehold contract for Sofitel Centara Grand Bangkok will not be renewed by the State Railway of Thailand (SRT) upon expiration in 2008. The “stable” outlook is based on the expectation that CENTEL will be able to generate a substantial amount of cash from operations and will use a significant portion of its cash from operations to fund the expansion plan. The company’s rating or outlook will be negatively impacted if its financial performance falls below TRIS Rating’s expectations, as financial leverage would weaken due to increased borrowing to finance the expansion. TRIS Rating reported that CENTEL was founded in 1980 by the Chirathivat family to own and operate a hotel in Thailand. CENTEL currently owns and operates eleven 4- and 5-star hotels (more than 2,700 rooms) in seven provinces in Thailand. Hotel revenue is mostly derived from three major hotels: Sofitel Centara Grand Bangkok, Sofitel Centara Grand Resort & Villas Hua Hin and Centara Grand Beach Resort Samui. Except for Sofitel Centara Grand Resort & Villas Hua Hin, which is managed by Accor International, CENTEL manages the hotel properties under its own brand, ‘Centara’. Sofitel Centara Plaza and Novotel Centara Hat Yai are managed by CENTEL under an Accor franchise. CENTEL also operates the QSR business under its subsidiary, Central Retail Group (CRG). CRG’s food portfolio consists of five international franchised QSR brands: KFC, Mister Donut, Pizza Hut, Baskin Robbins, and Auntie Anne’s. CENTEL operates a combined total of more than 460 outlets countrywide. Revenue from the QSR business remains CENTEL’s largest contributor, accounting for around 60% of total revenue over the last five years; the rest was generated by the hotel business. In the first half of 2007, though total revenue slightly increased to Bt3,471 million, from Bt3,427 million for the same period of 2006, QSR sales decreased slightly by 2%, from Bt2,143 million to Bt2,101 million due to a slowdown in consumption and high competition in the fast food industry. Though revenue from hotel operations increased by 6% after the full opening of Centara Grand Beach Resort & Villas Krabi in late 2006, CENTEL’s average revenue per available room (RevPAR) decreased from Bt2,786 in the first half of 2006 to Bt2,177 in the same period of 2007, reflecting a slowdown in the tourism industry in Thailand and the effect from strengthening of the Thai baht. CENTEL’s debt to capitalization ratio increased slightly from 52.7% at the end of 2006 to 53.5% in June 2007 as total debt increased to Bt4,677 million. In the first half of 2007, CENTEL continued its hotel expansion by spending another Bt1,105 million for three properties in Bangkok, Pattaya and Phuket. The ratio of CENTEL’s funds from operations to total debt slightly increased to 23% (annualized) in the first half of 2007 from 20.9% in 2006, while its earnings before interest, tax, depreciation, and amortization (EBITDA) interest coverage remained at 8 times, the same as in 2006.Central Plaza Hotel PLC (CENTEL)Company Rating: Affirmed at A-Issue Ratings:CENT07OA: Bt400 million senior debentures due 2007 Affirmed at A-CENT092A: Bt300 million senior debentures due 2009 Affirmed at A-CENT096A: Bt1,200 million senior debentures due 2009 Affirmed at A-Up to Bt1,300 million senior debentures due 2009 A-Rating Outlook: Stable