TRIS Rating views that the merger of Bangkok Expressway PLC (BECL) and Bangkok Metro PLC (BMCL) will neutrally impact BECL's credit ratings considering share conversion plan. The rights and obligations of all of BECL's rated debentures will be transferred to the new company. The credit risk of the new company will likely be in line with BECL's current ratings. The new company’s business profile will be strengthened, combining the expressways and the mass rapid transit system (MRT) businesses. The financial position will slightly soften taken into account the weaker operating performance of MRT. However, the solid cash flow from the expressway will be able support the consolidated financial obligations.
On 21 January 2015, the board of directors of BECL approved the merger of BECL and BMCL. The transaction is subject to the approval by the shareholders of BECL and BMCL in April 2015. The merger is expected to be completed in August 2015 which the new company will be listed on the Stock Exchange of Thailand (SET).
BECL built and operates the elevated Si Rat Expressway (the Second Stage Expressway System -- SES) and the Udon Ratthaya Expressway (Bang Pa In-Pak Kret Expressway). BECL is now constructing a new expressway project, the Si Rat-Western Bangkok Outer Ring Road Expressway (SOE). BMCL is operating the MRT Chaloem Ratchamongkhon line (Hualamphong-Bang Sue). BMCL recently entered into an agreement to operate the MRT Purple Line (Bang Yai - Rat Burana and Bang Yai - Bang Sue), which is expected to open in late 2016. In TRIS Rating's view, the new company will have a strong business risk profile, backed by diversified and quality assets, long contractual agreements, growth prospects of MRT, and new projects to be commenced in the next two years. In addition, the new company will be a qualified short list for the future public transportation development projects to be launched by the government.
Financial profile on a consolidated basis will be relatively softened. The weaker operating performance of the MRT segment will lower the debt service ability, but will remain acceptable considering the sustainable cash flow generation from BECL. The leverage will increase to fund two planned developing projects. In return, the operation of the new company will have a growth prospect from the opening of the MRT Purple Line and the SOE project in the late 2016.
Concerning factor related to the merger is a chance that creditors or debentureholders will want to redeem their debts. However, the company has planned to reserve refinancing facility to handle the matter. In the case that some shareholders disagree with the transaction, CH. Karnchang PLC (CK), a major shareholder of both BECL and BMCL, plus its allies, have prepared a budget of Bt10 billion to purchase shares from those shareholders, which is considered sufficient to support the deal. If any further events arise, further credit rating action will be taken.
BECL is currently assigned the company and senior unsecured debenture ratings at "A" with "stable" outlook by TRIS Rating.