TRIS Rating Affirms Company & Issue Ratings of “CPN” at “A+”with “Stable” Outlook

TRIS Rating Co., Ltd. has affirmed the company rating of Central Pattana PLC (CPN) and has affirmed the ratings of CPN’s senior debentures at “A+” with “stable” outlook. The ratings reflect the company’s leading position in the retail property development market, proven record in managing high-quality shopping centers, reliable cash flow from contract-based rental and service income, and conservative financial policy. The ratings also take into consideration the recent fire at the CentralWorld shopping center, the significant amount of capital expenditures needed for expansion during the next three years and the uncertain political situation in Thailand.

The “stable” outlook reflects CPN’s ability to maintain its solid position in the retail property development industry. With a diversified portfolio of shopping centers, flexibility in managing capital expenditures, and strong support from shareholders, CPN has sufficient ability to withstand unexpected events affecting operations.

TRIS Rating reported that CPN is the largest retail property developer in Thailand. Its major shareholders are the Chirathivat family (32%) and Central Holding Co., Ltd. (27%), the leading retailer in Thailand. The ownership link with the Central Group is seen as a benefit since Central Department Store has been a strong magnet for shopping centers owned by CPN. As of June 2010, CPN managed 14 shopping centers, with total retail space of 779,211 square meters (sq.m.), in Bangkok and other major cities in Thailand. However, if CentralWorld, which has been temporarily closed, is included in the total, total retail space would be 966,239 sq.m. The amount of retail space in Bangkok operated by CPN has expanded continuously, growing at an average rate of 6.1% per annum for the past five years. At the same time, the total supply of retail space in Greater Bangkok grew by an average of 6% per annum. CPN has long been the market leader in the retail property market in Thailand. As measured by total retail space in Greater Bangkok, CPN had 22% market share at the end of June 2010. The market share of CPN in Greater Bangkok was slightly lower than in the previous year, as most new CPN shopping centers were located in provincial areas.

TRIS Rating said, CPN’s solid operating performance is attributable to high occupancy rates and healthy same store sales growth for its shopping centers. As of March 2010, the average occupancy rate of the 15 shopping centers stood at 96%, better than the industry average of 93.4%. CPN opened three new shopping centers despite a sluggish economy in 2009: CentralFestival Pattaya Beach, CentralPlaza Chonburi, and CentralPlaza Khonkaen. These three new centers have each achieved a 90% occupancy rate.

The prolonged and violent political unrest during March-May 2010 in Bangkok severely affected CentralWorld, which is located at Ratchaprasong junction, the center of the protest. CentralWorld is CPN’s largest shopping center with retail space of 187,028 sq.m. CPN has closed the CentralWorld shopping center since April 2010 and the center was partially damaged by fire on 19 May 2010. The loss was initially estimated at no more than Bt3,500 million. The loss is expected to be mostly covered by insurance policies, including industrial all risk, business interruption and terrorism insurance. CPN plans to renovate CentralWorld and expects to re-open most of the CentralWorld space by December 2010. The reconstruction of the Zen department store, majority-owned by the Chirathivat family, is expected to be completed in the third quarter of 2011. In order to compensate for the revenue shortfall from the closure of CentralWorld, CPN has postponed the planned closure and renovation of the CentralPlaza Lardprao shopping center. The closure and renovation will start in the first quarter of 2011.

For the first six months of 2010, the company’s rental and service income slightly decreased, falling by 1.7% to Bt4,900 million, compared with the first six months of 2009. The decrease derived mainly from the loss of income from closing CentralWorld and the transfer of CentralPlaza Pinklao to a property fund in late 2009. However, contributions from three new shopping centers opened in 2009 and CentralPlaza Udonthani, acquired in 2009, helped mitigate the impact from the fire at CentralWorld.

In November 2009, CPN successfully subleased CentralPlaza Pinklao to CPN Retail Growth Leasehold Property Fund (CPNRF), improving its total debt to capitalization ratio from 52.26% in 2008 to 48.55% in 2009. However, as of June 2010, the total debt to capitalization ratio increased to 50.71% and total debt rose to Bt19,511 million, due to ongoing capital expenditures of approximately Bt9,000 million for 2010, including new expansion projects and the renovation of CentralWorld. During 2011-2013, development plans will require Bt8,000-Bt9,500 million in capital expenditures annually. To maintain the net debt to equity ratio below one, the company plans to fund these expansion projects using a combination of cash flow from operations, new borrowings, and the lease of assets to property funds. -- End

Company Rating: Affirmed at A+ Issue Ratings: CPN10DA: Bt1,500 million senior debentures due 2010 Affirmed at A+ CPN119A: Bt1,500 million senior debentures due 2011 Affirmed at A+ CPN126A: Bt3,000 million senior debentures due 2012 Affirmed at A+ CPN135A: Bt2,000 million senior debentures due 2013 Affirmed at A+ CPN136A: Bt1,200 million senior debentures due 2013 Affirmed at A+ CPN145A: Bt1,000 million senior debentures due 2014 Affirmed at A+ Rating Outlook: Stable Copyright 2010, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information. All methodologies used can be found at http://www.trisrating.com/en/rating_information/rating_criteria.html.