Bangkok--8 Apr--Fitch Ratings
Fitch Ratings (Thailand) Limited has today downgraded Holcim Capital (Thailand) Ltd's (HCT) guaranteed debenture - Series II (due 2010) and Series III (due 2012), amounting to THB4.6bn, to 'AA-(tha)' (AA minus(tha)) from 'AA(tha)'. The rating Outlook remains Negative. This follows the agency's downgrade of the Long-term foreign currency Issuer Default Rating (IDR) of Swiss-based Holcim Ltd. (Holcim), the guarantor of HCT's debentures, by one notch to 'BBB' from 'BBB+' with a Negative Outlook. The ratings of HCT's debentures are based entirely on the irrevocable and unconditional guarantee provided by Holcim.
The downgrade of Holcim's ratings reflects Fitch's view that a deeper-than-anticipated global recession will translate into persistent challenging trading conditions in the building materials industry in mature markets. At the same time, the industry faces diminished prospects in emerging markets as economic growth in these regions slows as well. In this context, Fitch expects Holcim's cash flow from operations will be lower in the next 24 months than previously forecast. While Holcim has announced a number of measures including capacity reductions in all segments, cost-cutting, expansionary and maintenance capex reduction, as well as a scrip dividend for 2008, the agency believes that these measures will likely not be sufficient to offset the negative pressure on operational cash flow. As a result, Fitch expects that the pace of de-leveraging will not allow Holcim to return to credit metrics that are commensurate with a 'BBB+' rating in the next 24 months.
The Negative Outlook on the guaranteed debentures reflects the Outlook of the guarantor. This could be revised to Stable should Holcim's ratings stabilise. Conversely, a further downgrade of Holcim's rating could result in a downgrade of the guaranteed debentures' ratings. Investors should note that a one-notch change in an International rating could result in a change of more than one notch in the debentures' National rating.
For further details, please see the commentary entitled "Fitch Downgrades Holcim to 'BBB'; Negative Outlook", available on the agency's website, www.fitchratings.com.
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(tha)' for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
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