Bangkok--23 Nov--Moody's
Moody's Investors Service has today affirmed Advance Agro Public Company Ltd's ("Advance Agro") B3 corporate family rating and B3 senior unsecured bond rating; the outlook on both ratings is negative.
The rating affirmation is in response to Advance Agro's announced cash-funded tender offer for its outstanding US$144.055m 11% notes due 2012, in which it plans to buy back up to US$73.5m of its notes at a price of between 98.5-100 cents on the dollar. As part of the tender offer, the company is also seeking the consent of its noteholders to eliminate substantially all of the restrictive provisions of the indenture governing the US$ notes.
The buy back will be funded through a mixture of cash on hand and a potential Thai Baht bond issuance with a lower interest rate and longer maturity profile than the US$ notes.
"Moody's believes that this transaction will have a limited impact on Advance Agro's financial profile given the modest saving in interest expenses," says Wonnie Chu, a Moody's Analyst, adding, "This specific transaction seeks to provide the company with additional financial flexibility as it undertakes a corporate restructuring exercise which Moody's will continue to monitor and evaluate any resulting rating impact."
Advance Agro's financial profile is strong for its B3 rating. It reported annualized debt/EBITDA of about 2.3x in the first half of 2009. However, its B3 rating with a negative outlook continues to reflect Moody's concern over the company's private ownership structure, its corporate transparency, and clarity over its financial policy and business strategies.
The possibility of upward rating pressure is limited given the current negative rating outlook. However, the outlook could revert to stable if Moody's draws more comfort from the track record of Advance Agro's business strategy and improving financial profile.
On the other hand, the rating could be downgraded if there is evidence that the company's corporate governance and disclosure practices are weakening, or that the company's financial profile is deteriorating with EBITDA/Interest falling below 1.2-1.5x.
The principal methodology used in rating Advance Agro was Moody's 'Global Paper & Forest Products Industry' methodology, published in September 2009 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab.
The last rating action with regard to Advance Agro was taken on 8th November, 2007, when the outlook on the company's ratings was changed to negative following the announcement of its privatization.
Established in 1989, Advance Agro Public Co Ltd ("Advance Agro") is a Thailand-based integrated producer and distributor of pulp, printing paper and writing paper. The company operates three paper mills, including the original mill located in Lamkao Jun Village, with an annual capacity of 600,000 tonnes and two pulp mills with an annual capacity of 580,000 tonnes.
Following a purchase offer for the company's shares by a director and shareholder at end-2007, the company was de-listed from the Stock Exchange of Thailand in April, 2008.
Hong Kong
Wonnie Chu
Analyst
Corporate Finance Group
Moody's Asia Pacific Ltd.
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Singapore
Tony Tsai
Senior Vice President
Corporate Finance Group
Moody's Singapore Pte Ltd.
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