TRIS Rating Revises Rating Outlook of “SST” to “Developing” from “Stable”, with Company Rating Affirmed at “BBB”

TRIS Rating Co., Ltd. has changed the rating outlook of Sub Sri Thai PLC (SST) to “developing” from “stable”, and at the same time has affirmed the company rating of SST at “BBB”.

TRIS Rating said the action follows SST’s announcement to acquire 99.7% of the total outstanding shares of Industrial Enterprises Co., Ltd., the producer of “Tip” brand vegetable oil. Industrial Enterprises and Krungthai Bank PLC have entered a debt restructuring agreement. As part of the restructuring, SST will act as co-investor by purchasing nearly all of the equity of Industrial Enterprises. The investment will be worth Bt200 million. Currently, SST is negotiating with the creditors of Industrial Enterprises and plans to take Industrial Enterprises into a rehabilitation process under the supervision of the Bankruptcy Court. The transaction is expected to be completed by the end of 2010. However, SST has signed an agreement to purchase the trademarks patents and labels of “Tip Oil” as well as product designs. The purchase value covered by the agreement is Bt55 million. SST has already paid to Industrial Enterprises Bt26.7 million.

The acquisition of Industrial Enterprises is subject to several conditions including the approval by the creditors and the Bankruptcy Court of the rehabilitation plan of Industrial Enterprises, and the approval of the acquisition by SST’s board of directors and shareholders. If SST can successfully take over Industrial Enterprises, SST’s business and financial profile will be significantly changed.

TRIS Rating will conduct an extensive review to determine the impact of the transaction on SST’s credit profile and will issue a rating update once the aforementioned terms and conditions of the investment have been fulfilled.

Industrial Enterprises produces and distributes vegetable oil made from soybeans and cotton under the “Tip” trademark. As of December 2009, the company’s total assets were Bt1,125 million with total liabilities of Bt1,875 million. The company had shareholders’ equity deficit of Bt748 million.

The affirmed “BBB” company rating reflects SST’s long track record in the warehouse industry, recurring income from document storage and rental fees as well as a strong balance sheet. However, these strengths are partially offset by the company’s reliance on major customers due to its small business size, the maturing stage of traditional warehousing business and price competition in document storage business, TRIS Rating added. -- End

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