TRIS Rating Affirms Guaranteed Debt Rating on “LVMCS” at “BB+” and Revises Outlook to “Negative” from “Stable”

TRIS Rating affirms the rating on the guaranteed debentures of US$25.7 million issued by LVMC Holdings Singapore Pte. Ltd. (LVMCS, previously known as Kolao Holdings Singapore Pte. Ltd. (KHS)) at “BB+”. At the same time, we revise the outlook to “negative” from “stable”. The “negative” outlook reflects our downward revision on the outlook of the guarantor, LVMC Holdings (LVMC, the Group).

The debentures are jointly and severally guaranteed by LVMC and Kolao Developing Co., Ltd. (KDC). Therefore, the issue rating reflects the credit worthiness of LVMC and KDC. KDC, a wholly-owned subsidiary of LVMC, is classified as a “core” subsidiary of LVMC. Thus, KDC’s rating is equivalent to LVMC’s rating, or the Group’s rating.

Under the guarantee agreement, LVMC and KDC jointly and severally provide unconditional and irrevocable guarantee on all amounts due under the debentures, including the principal amount of US$25.7 million and any interest accrued thereon and other related expenses. The guaranteed debentures rank at least equally with all other unsecured and unsubordinated obligations of LVMC and KDC.

LVMCS was incorporated in 2013 as a wholly-owned subsidiary of LVMC. LVMCS, through its subsidiaries, sells automobiles in Myanmar. As LVMCS’s business is currently small, the sources of interest and principal repayments to the debenture holders will come from the interest and principal repayments received from LVMC under the inter-company loan agreement between LVMCS and LVMC.

RATING OUTLOOK

The “negative” outlook reflects the outlooks of LVMC and KDC. Operating performance of the Group in the core market dropped significantly, and it should take longer time than previously expected to recover. Expansion into other countries with evolving regulatory frameworks also heightens operational risks, despite additional revenue.

RATING SENSITIVITIES

The issue rating and/or outlook could be changed if the ratings and/or outlooks of the two guarantors change.

RELATED CRITERIA

- Key Financial Ratios and Adjustments, 5 September 2018

- Rating Methodology – Corporate, 31 October 2007

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