TRIS Rating Says: Capital Injection by FPHT is Credit Positive, But Has No

On 10 October 2016, TICON INDUSTRIAL CONNECTION PLC (TICON) announced that its board of directors (BOD) approved a Bt13,230 million capital increase through a private placement. The private placement comprises 735 million newly-issued shares of TICON sold to Fraser Property Holding Thailand (FPHT) at an offering price of Bt18 apiece. The major condition for the successful completion of the private placement is that FPHT must obtain a waiver from making a tender offer for all of TICON’s securities by the extraordinary general meeting (EGM) resolution (Whitewash). TICON’s BOD also resolved to terminate plan to sell assets worth Bt1,443 million to real estate investment trust (REIT) by the end of this year. The plans for the private placement will be submitted for shareholder approval at the upcoming EGM on 19 December 2016. TICON plans to use two thirds of the proceeds from the capital increase to repay outstanding debt; the balance will be reserved for capital expenditures.

FPHT is a wholly-owned subsidiary of Fraser Centrepoint Ltd. (FCL), a company controlled by the Sirivadhanabhakdi family. FCL is one of leading real estate companies in Singapore, listed on the main board of the Singapore Exchange Securities Trading Ltd. FCL’s scope of business covers residential, commercial, retail, and industrial property in Singapore and Australia, as well as the hospitality business in more than 80 cities. FCL also has an international business arm that attends to FCL’s investments in China, Southeast Asian nations, and the United Kingdom. FCL earned revenues of S$2,251.6 million in the first nine months of the 2016 fiscal year spanning October 2015 to June 2016.

TRIS Rating holds a positive view over the announcement of TICON’s capital increase plan. However, the plan remains subject to the EGM approval. If TICON’s capital injection by FPHT is successful, its financial profile will improve significantly in 2017 since most of the proceeds from the capital increase will be used to repay debt. The debt-to-capitalization ratio, after the capital increase, will improve to around 40% in 2017, lower than current level of 63%. The FPHT will become the major shareholder of TICON, holding 40% of the company. Rojana Industrial Park PLC (ROJNA), which was the largest shareholder before the capital increase, will now hold 26.1%, down from 43.6%. The new shareholder, FPHT, will influence the company future direction as it will nominate three out of eight directors on TICON’s BOD and send representatives to join in TICON’s management team. Therefore, any materially positive effect on TICON’s credit profile will ultimately depend on TICON’s successful debt reduction, business direction, and financial policies as well as operating performances after the change in the shareholding structure.

TRIS Rating currently assigns ratings of “A-” to the company rating of TICON and to the outstanding senior unsecured debentures, along with a “stable” outlook.-- End

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TRIS Rating Says: Capital Injection by FPHT is Credit Positive, But Has No Immediate Impact on Ratings of “TICON”