Bangkok--14 May--Fitch Ratings Fitch Ratings has today downgraded Thailand-based The Erawan Group Public Company Limited's (Erawan) National Long-term senior unsecured debt rating to 'BBB-(minus)(tha)' from 'BBB(tha)', and affirmed its National Short-term senior unsecured debt rating at 'F3(tha)'. Fitch has simultaneously withdrawn the ratings and will no longer provide ratings or analytical coverage on Erawan. The rating downgrade reflects a weaker-than-expected medium-term EBITDAR growth prospect, as a result of the intensifying competition in the hotel industry and the delay of some new hotel projects. The company's remaining large investment plan will also further limit its financial flexibility, with the adjusted net debt to EBITDAR ratio likely to remain high at about 5.0x (or net debt to EBITDA of about 4.8x) for another two years. This follows Fitch's revision of Erawan's rating Outlook to Negative from Stable in January 2007, in view of the company's more aggressive investment policy. This reflected a change in strategy to increase leverage to improve shareholder returns. Nonetheless, in management's view, the net debt to EBITDA ratio could decline to about 4.0x by end-2009 from 4.8x in 2008. In addition, management expects to partly mitigate the high leverage risk during 2008-09 through structuring a low debt amortisation schedule during this period. In 2007, Erawan reported a worse-than-expected EBITDAR performance largely due to the impact from a sharp drop in occupancy rates as a result of increasing security worries after the New Year Eve's bombings in Bangkok. As a result, Erawan's EBITDAR declined by 14% year-on-year to THB1.1bn in 2007, which was significantly below the company's projection. In Q108, Erawan reported strong EBITDAR growth of 12% year-on-year given a strong recovery in hotel occupancy rates. Although Erawan's operating performance in 2008 is expected to significantly improve, thanks to a rebound in foreign tourists as well as the opening of new hotels, the company's medium-term earnings growth outlook will likely be impacted by intensifying competition due to a sharp rise in room supply over the next two-to-three years. Partially mitigating these risks are the company's existing high quality assets, its ability to manage through past downcycles and maintain market share, its strong brand recognition and established relationship with leading international hotel chains, as well as a capable management team. Meanwhile, expansion to the mid-tier segment through 10 planned Ibis-branded new hotels should provide greater earnings diversification and stability in the long-term. Contacts: Wasant Polcharoen, Lertchai Kochareonrattanakul, Vincent Milton, Bangkok, Tel: +662 655 4755 . Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364; Shivani Sundralingam, Singapore, Tel: + 65 6796 7215. 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.