Bangkok--8 Dec--TRIS Rating
TRIS Rating Co., Ltd., the Thai credit rating agency, today reports that credit ratings of True Corporation PLC (TRUE) are being closely monitored in light of its subsidiary, True Move Co., Ltd. (True Move), faces a potential breach of the financial covenants.
Because of a slowdown in economic activity and intense competition among providers of wireless phone services, operating performance of True Move, a 75%-owned subsidiary of TRUE, has weakened. The performance has deteriorated to the extent that the company may not be able to pass the year-end covenant thresholds. The item of most concern is the ratio of net debt to EBITDA (earnings before interest, tax, depreciation and amortization), says TRIS Rating.
True Move has been a major driver of growth for TRUE over the past few years. True Move contributes approximately 44% and 31% of TRUE’s revenue and EBITDA, respectively. Any negative implications for True Move’s performance will inevitably undermine TRUE’s credit rating profile, says the rating agency. For the past three consecutive quarters, True Move reported declining revenues and deteriorating cash flows as a result of falling ARPU (average revenue per user) and higher net interconnection charge payments.
In light of these underlying circumstances, TRIS Rating believes that True Move will most likely need to obtain covenant waivers from lenders or request for shareholder support in the near term. Even if True Move can pass the covenants or secure waiver this time, the rating agency warns that concerns remain. The company has limited financial flexibility given that the covenants will become even tighter next year. True Move will face a dilemma as sluggish consumer spending and tightened credit conditions will continue to squeeze operating cash flows at a time when capital spending for network upgrading is needed to sustain its competitive edge, the rating agency adds.
As a result, TRIS Rating says that the credit ratings of TRUE and the performance of TRUE Group will be closely monitored. Necessary rating actions will be promptly taken should any significant developments arise. TRUE is currently rated “BBB” for the company and senior secured debentures and “A” for the senior secured partially guaranteed debentures, with a “stable” outlook by TRIS Rating.