Bangkok--9 Mar--Moody's
Approximately US$170 Million of Debt Securities Affected
Moody's Investors Service has downgraded the corporate family rating and senior unsecured ratings of G Steel Public Company ("G Steel") to Caa3 from Caa1. The outlook for the ratings remains negative.
"The rating action reflects significant uncertainty over G Steel's current liquidity position, following recent qualifications and a disclaimer of opinion by its external auditors, Ernst & Young Office Limited, on the company's financial statements ended 31 December 2008," says Kathleen Lee, a Moody's Vice President.
The main concerns raised by the auditors relate to the quality and sufficiency of allowances provided on the company's outstanding trade receivables; expected future losses, in view of committed higher prices for its consigned/ purchases of raw materials versus prevailing market prices; the absence of impairment charges, given long-dated appraised values of its assets; and a shortage of liquidity at its subsidiary for meeting debt payments in 2009.
On a consolidated basis, G Steel had trade receivables of Bht 3,957 million outstanding as at 31Dec08. Of this total, Bht 3,582 million pertained to 3 unrelated parties, had incomplete documentation for authorization of sales, lacked evidence of delivery of goods, and did not have signatures acknowledging receipt of goods.
"The uncertainty of collection on these trade receivables of Bht 3,582 million will exacerbate the company's already poor liquidity and its access to bank funding will be further constrained," adds Lee.
The negative outlook reflects the continuing challenging nature of the operating environment facing G Steel over the medium term, as well as the company's weak liquidity position. It also takes into account the near-term financing risk evident under its scheduled semi-annual loan maturities in 2009, and which do not have the support of available committed facilities.
The previous rating action was on January 8, 2009, when G Steel's corporate family rating and unsecured debt rating were downgraded to Caa1 with a negative outlook.
The principal methodology used in rating G Steel was the Rating Methodology for Global Steel Industry, which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory.
Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory.
Headquartered in Bangkok, G Steel Public Company Limited ("G Steel") is Thailand's second largest hot rolled coil ("HRC") steel manufacturer and distributor.
Founded in 1995, the company's steel products were eventually produced in late 1999; the start-up thus straddled the worst period of the Asian crisis. The company completed a rehabilitation program in September 2003 and changed its name to G Steel Public Co Ltd in March 2004 from Siam Strip Mill Public Co Ltd. Restructured debt was subsequently pre-paid and an IPO completed in January 2006.
Singapore
Kathleen Lee
Vice President - Senior Analyst
Corporate Finance Group
Moody's Singapore Pte Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (65) 6398-8308
Singapore
Tony Tsai
Senior Vice President
Corporate Finance Group
Moody's Singapore Pte Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (65) 6398-8308