Bangkok--9 Oct--TRIS Rating TRIS Rating Co., Ltd. has assigned the rating of “A-” to the proposed issue of up to Bt7,500 million in senior debentures to Bangkok Expressway PLC (BECL). At the same time, TRIS Rating has affirmed the company rating of BECL at “A” and has affirmed the ratings of BECL’s current senior debentures at “A-”. The rating outlook remains “stable”. The lower ratings of the debentures reflect lower priority claims of the debenture holders compared with the existing secured creditors. BECL’s corporate credit rating is based on stable cash flow generation supported by established traffic volume, the benefit of being the only toll road system linked to the First Stage Expressway System (FES) to form a comprehensive road network for Bangkok, and the proven track record of management. The rating also takes into consideration the company’s current debt profile, which is structured to match debt service obligations with operating cash flows until the debts mature. These strengths are partially offset by high leverage, uncertainty over future government transportation policies, and the government’s potential intervention in toll adjustments. The proceeds from BECL’s debentures will be used to partially refinance its floating rate debt in order to mitigate interest rate volatility. The “stable” outlook reflects the expectation that the traffic on the expressways will remain strong, which will in turn produce sufficient debt service coverage. TRIS Rating also expects BECL to provide good service and maintain the roads in good conditions to attract new commuters. In addition, should the company decide to explore new business opportunities, its financial structure should not deteriorate from the current position. TRIS Rating reported that BECL built and operates the elevated Si Rat Expressway (the Second Stage Expressway System or the SES) and its various extensions under 30-year Build-Transfer-Operate (BTO) concessions from the Expressway Authority of Thailand (EXAT). The SES was constructed as a six-lane elevated expressway for a total length of approximately 38.5 kilometers (km.) long. The SES comprises four sectors linked to the FES, which was constructed and has been operated by the EXAT. The roads form a city ring road, with routes to the north, east, southeast and southwest, creating a comprehensive road network for Bangkok residents that provides an alternative to the heavily congested free roads within central Bangkok and the suburbs. In addition, BECL incorporated a subsidiary, Northern Bangkok Expressway Co., Ltd. (NECL), to carry out construction and management of the Udon Ratthaya Expressway (Bang Pa In-Pak Kret Expressway), known as SES Sector C+, for a total length of 32 km. under a 30-year BTO concession with the EXAT. BECL currently holds 53.33% of NECL’s registered capital. TRIS Rating said, BECL’s financial performance depends on the traffic volume on the expressways, the toll rate, and operating costs. Though traffic volume on the expressways has continuously increased during the past few years, it started to decline in 2008. The drop was due to the opening of the toll-free Southern Outer Bangkok Ring Road (SOBRR), skyrocketing gasoline prices, and an economic slow-down. For the first eight months of 2008, traffic volume declined by 5.47% to an average of 928,741 cars per day, compared with an average of 982,490 cars per day in the same period of the prior year. However, TRIS Rating views that the decline in traffic volume will be temporary. The drop in traffic volume on FES and Sector D should partially recover once the SBORR starts collecting toll fee which is expected to be the beginning of 2009. Gasoline prices have softened somewhat as crude oil prices have fallen during the past months. The government also reduced the oil excise tax of Bt3 per litre for six months starting in July 2008. Expressway traffic volume started to recover during the past month. In the medium term, TRIS Rating expects that the continuous growth of the Thai economy, further construction of residential housing in the areas surrounding the city, and heavy traffic congestion on free roads will continue to support demand for toll roads. For the first six months of 2008, BECL reported toll revenue of Bt3,395 million, down by Bt182 million or 5.10% from the same period of the previous year. Operating profit margin declined to 83.82%, compared with 86.32% in 2007. The decline was due to higher provision for compensation paid for site acquisition. However, the operating margin is expected to improve in the second half of the year since the toll rates rose in September 2008. Though cash flow slightly dropped due to a decline in traffic volume, BECL’s capital structure and cash flow protection improved as a result of loan repayments and lower financing costs. As of August 2008, BECL’s total debt was Bt24,922 million, down by Bt1,678 million from Bt26,600 million at the end of 2007. Interest expenses fell to Bt632 million in the first six months of 2008 from Bt693 million in the same period of the prior year. The decline was a result of loan repayments and a reduction in financing costs due to the issuance of Bt7,500 million senior debentures in August 2007. As a result, both the total debt to capitalization ratio and earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio strengthened from 62.39% and 3.98 times in 2007 to 60.15% and 4.58 times as of June 2008. Meanwhile, the ratio of funds from operations (FFO) to total debt during the first six months of 2008 was 7.59% (non-annualized), compared with 15.46% of fiscal year 2007. However, this ratio is expected to improve in the fourth quarter of the year once it reflects the effect of toll rate adjustments. TRIS Rating said, despite having high leverage, BECL’s liquidity position is strong, supported by fairly stable cash flow resulting from stable traffic volume, predictable financial obligations, and strong support from financial institutions. However, starting in October 2008, BECL will face interest rate risk as interest rates on parts of its loans will be changed from a fixed rate to a floating rate at MLR-2%. The issuance of the proposed debentures under fixed rate will help the company partially mitigate the interest rate risk. Bangkok Expressway PLC (BECL) Company Rating: Affirmed at A Issue Ratings: BECL108A: Bt3,905 million senior debentures due 2010 Affirmed at A-BECL128A: Bt1,895 million senior debentures due 2012 Affirmed at A-BECL148A: Bt1,700 million senior debentures due 2014 Affirmed at A-Up to Bt7,500 million senior debentures due 2015 A-Rating Outlook: Stable