TRIS Rating Co., Ltd. has removed the CreditAlert with “negative” implication placed on the company and issue ratings of Italian-Thai Development PLC (ITD) since 2 July 2012. At the same time TRIS Rating has affirmed ITD’s company and issue ratings at “BB+” with “negative” outlook. The rating actions follow the resolution of the financial covenant violations at the end of June 2012. According to its financial agreements, ITD has to keep its net debt to equity ratio at or below 2.5. At the end of June 2012, ITD’s net debt to equity ratio stood at 3.11. ITD received approval from its bondholders on 26 July 2012 and 6 August 2012 to permit the net debt to equity ratio to exceed 2.5 times at the end of the second quarter and at the year end. Although, the company also received waivers from its banks for the financial covenant breaches at the end of June 2012, there is a possibility that the company will breach its bank covenants and need to ask for waivers again.
The “negative” outlook reflects the continued weakening of ITD’s financial profile due to rising leverage and tightening liquidity. The ratings could be downgraded if the company cannot improve its capital structure and if its financial profile deteriorates further. The rating outlook could be revised upward if ITD’s leverage and liquidity improve and if it can get some breathing room on its financial covenants.
TRIS Rating reported that ITD’s operating performance remains weak. The company reported a net loss of Bt196 million in the second quarter of 2012. The net loss was mainly due to a provision for bad debts from overseas projects. As of June 2012, outstanding debt totaled Bt28,751 million, up from Bt27,674 million as of March 2012. The debt to capitalization ratio stood at 77.04% at the end of June 2012, up slightly from 75.57% at the end of March 2012. ITD’s Liquidity remains weak, with the earnings before interest, tax, depreciation, and amortization (EBITDA) interest coverage ratio dropping slightly to 1.61 times from 1.71 times at the end of March 2012. The management team plans to reduce debt by selling its investments and streamlining its operations to control costs. If the company successfully implements its plan, it should be able to avoid a covenant breach and get some breathing room on its covenants.
TRIS Rating said, ITD is Thailand’s largest construction contractor. Its leading market position is supported by a strong track record, good relationships with both private and public sector clients, self-sufficiency in key raw materials, an extensive machinery and equipment fleet, and an adequate supply of skilled labor and engineers. — End.
Company Rating: Affirmed at BB+ Issue Ratings: ITD139A: Bt1,500 million senior debentures due 2013 Affirmed at BB+ ITD146A: Bt5,000 million senior debentures due 2014 Affirmed at BB+ ITD159A: Bt1,000 million senior debentures due 2015 Affirmed at BB+ ITD166A: Bt3,500 million senior debentures due 2016 Affirmed at BB+ Rating Outlook: Negative
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