Bangkok--Oct 3--TRIS
Thai Rating and Information Services (TRIS) announced Friday 3
October 1997 in a CreditUpdate that it has lowered the ratings for 500
million baht debentures and 1,300 million baht convertible debentures of
Tipco Asphalt PLC (TASCO) to BBB- from BBB. The downgrade reflects
concern over the impact on the asphalt industry of the government budget
cuts and Thailand's economic problems. The sharp depreciation of the baht
is also likely to raise the company's raw material cost and somewhat
deteriorate its financial profile. However, its market leadership helps
maintain satisfactory profitability.
According to TRIS, the government's recent budget cuts are
forecast to affect road construction projects. The total budget of the
fiscal year 1998 was cut by 2% from 944 billion baht to 923 billion baht.
With the expected decrease of government income, the budget is likely to
decrease continuously, and the budget for land transportation is also
forecast to decrease in the next fiscal year. In addition, the government
policy to delay investment in several road projects will cause a decrease
of demand for asphalt products in the near future. As of June 1997,
TASCO's total loan portfolio amounted to 3,837 million baht with 67% held
in foreign currency. The company is also obliged to pay USD 8.8 million
ship lease fee in 13 equal quarterly installments. The fixed exchange rate
on the principle repayment of its euro-convertible debentures, accounting
for 76% of its foreign debt, has limited its foreign exchange risk
exposure to interest payment at a rate of 2.75% per year. However, the
company's exposure continues from a cross currency swap of its 500 million
baht debentures with a foreign currency portfolio. During the second half
of 1997, TASCO's exchange risk exposure will be based on lease fees
interest burden and short-term debt repayment of a multi-currency
portfolio valued at USD 7 million. Because raw material costs account for
around 50% of total sales, the company's cost of operation will still feel
the impact of the baht depreciation. Its provision of asphalt cement
through domestic sources will not relieve its foreign exchange risk
because the price will be quoted in US dollars.
However, with its market leadership holding 75% of the asphalt
emulsion market and firm customer base, TASCO is likely to maintain its
market share and satisfactory profit margin. Compared to the same period
in 1996, the company's sales during the first half of 1997 continuously
increased by 40.6% to 2,845 million baht. In addition, its operating
income as a percentage of sales satisfactorily increased from 15.24% at
the end of 1996 to 18.80% at the first half of 1997.
The rating is removed from CreditAlert, where it was placed on 3
July 1997, due to the decision by Bank of Thailand to alter the country's
foreign exchange regime from a basket of currencies to a managed float
which is a de facto devaluation of baht.
"CreditUpdate" reviews ratings of companies of debt issues that have already
been rated by TRIS. CreditUpdate occurs when new debt instruments are issued
or if significant events have taken place that may impact a company's current
ratings or when current ratings are cancelled. The update includes
information to supplement the previously pubished ratings.
Note: Tipco Asphalt PLC (TASCO) TRIS's rating
TASCO#1:500 mb sr debs due 1999 Downgraded to BBB- from BBB
TASCO@1:1,300 mb sr debs due 2000 Downgraded to BBB- from BBB
End.
Thai Rating and Information Services (TRIS) announced Friday 3
October 1997 in a CreditUpdate that it has lowered the ratings for 500
million baht debentures and 1,300 million baht convertible debentures of
Tipco Asphalt PLC (TASCO) to BBB- from BBB. The downgrade reflects
concern over the impact on the asphalt industry of the government budget
cuts and Thailand's economic problems. The sharp depreciation of the baht
is also likely to raise the company's raw material cost and somewhat
deteriorate its financial profile. However, its market leadership helps
maintain satisfactory profitability.
According to TRIS, the government's recent budget cuts are
forecast to affect road construction projects. The total budget of the
fiscal year 1998 was cut by 2% from 944 billion baht to 923 billion baht.
With the expected decrease of government income, the budget is likely to
decrease continuously, and the budget for land transportation is also
forecast to decrease in the next fiscal year. In addition, the government
policy to delay investment in several road projects will cause a decrease
of demand for asphalt products in the near future. As of June 1997,
TASCO's total loan portfolio amounted to 3,837 million baht with 67% held
in foreign currency. The company is also obliged to pay USD 8.8 million
ship lease fee in 13 equal quarterly installments. The fixed exchange rate
on the principle repayment of its euro-convertible debentures, accounting
for 76% of its foreign debt, has limited its foreign exchange risk
exposure to interest payment at a rate of 2.75% per year. However, the
company's exposure continues from a cross currency swap of its 500 million
baht debentures with a foreign currency portfolio. During the second half
of 1997, TASCO's exchange risk exposure will be based on lease fees
interest burden and short-term debt repayment of a multi-currency
portfolio valued at USD 7 million. Because raw material costs account for
around 50% of total sales, the company's cost of operation will still feel
the impact of the baht depreciation. Its provision of asphalt cement
through domestic sources will not relieve its foreign exchange risk
because the price will be quoted in US dollars.
However, with its market leadership holding 75% of the asphalt
emulsion market and firm customer base, TASCO is likely to maintain its
market share and satisfactory profit margin. Compared to the same period
in 1996, the company's sales during the first half of 1997 continuously
increased by 40.6% to 2,845 million baht. In addition, its operating
income as a percentage of sales satisfactorily increased from 15.24% at
the end of 1996 to 18.80% at the first half of 1997.
The rating is removed from CreditAlert, where it was placed on 3
July 1997, due to the decision by Bank of Thailand to alter the country's
foreign exchange regime from a basket of currencies to a managed float
which is a de facto devaluation of baht.
"CreditUpdate" reviews ratings of companies of debt issues that have already
been rated by TRIS. CreditUpdate occurs when new debt instruments are issued
or if significant events have taken place that may impact a company's current
ratings or when current ratings are cancelled. The update includes
information to supplement the previously pubished ratings.
Note: Tipco Asphalt PLC (TASCO) TRIS's rating
TASCO#1:500 mb sr debs due 1999 Downgraded to BBB- from BBB
TASCO@1:1,300 mb sr debs due 2000 Downgraded to BBB- from BBB
End.