Bangkok--29 Jul--TRIS Rating
TRIS Rating Co., Ltd. has placed the company and issue ratings of Thai Union Frozen Products PLC (TUF) on CreditAlert with “developing” implication. The rating action follows the announcement of TUF on 28 July 2010 to acquire 100% of interest in MW Brands Holdings SAS (MW Brands) for a total of Euro 680 million (or Bt28,496 million at Bt41.9055 for Euro 1).
TRIS Rating reported that MW Brands is a manufacturer of canned seafood products. Its business operation is vertically integrated from fleets to production facilities to distribution channels in the European market. The leading brand portfolio includes Petit Navire, John West, Mareblu, and Hyacinthe Parmentier. Canned tuna contributed about 73% of the total sales. Key production sites are located in Seychelles and Ghana. Major end markets are France, the United Kingdom, Italy, Ireland and the Netherlands. The company is owned by Trilantic Capital Partners, a private equity fund. As of fiscal year ended March 2010, MW Brands’ sales were Euro 448.2 million and total assets were Euro 559.4 million.
The transaction will be primarily debt financing. TUF will secure Euro 358 million from domestic banks and MW Brands will borrow another Euro 340 million from foreign banks. For the equity part, TUF will issue convertible debentures worth Euro 60 million and 65 million of new shares from right offering and private placement. Cash received from the equity financing will reduce the debt portion needed so that the overall funding raised will be approximately Euro 700 million.
The rating action reflects TRIS Rating’s primary assessment that the transaction should strengthen TUF’s business profile. TUF should become a leading global seafood player with a stronger market diversity. Major synergies could be achieved from raw material procurements, production facilities and know-how sharing. However, these benefits are weighed against a deterioration of financial profile as a result of the sizable leverage financing. After the acquisition, TUF’s debt to EBITDA (earnings before interest, tax, depreciation and amortization) ratio is expected to rise to 4.2 times from the current level of 1.9 times. There are also risks in executing the transaction and business integration in subsequent period.
TRIS Rating expects to resolve the CreditAlert after major condition precedents of the deal are fulfilled and a thorough analysis has been conducted. A rating confirmation would be likely if TUF demonstrates the capacity to generate stable cash flows and bring down its leverage in the medium term. A downgrade could occur should the financial profile emerge weaker than expected and longer period is needed to repair the debt service capacity.
Thai Union Frozen Products PLC (TUF)
Company Rating: A+Issue Ratings:
TUF10NA: Bt1,500 million senior debentures due 2010 A+
TUF116A: Bt3,200 million senior debentures due 2011 A+
TUF13NA: Bt500 million senior debentures due 2013 A+
CreditAlert Designation: Developing