TRIS Updates GECAL's Ratings
Thai Rating and Information Services Co., Ltd. (TRIS) announced in a CreditUpdate Wednesday 15 March 2000
that it has affirmed the company rating of GE Capital Auto Lease Pcl (GECAL) at "A" and has assigned an "A" rating for
the company's Bt5,000 million senior debentures. The ratings reflect GECAL's improved operations and performance and
the support from its ultimate parent company, General Electric Capital Corporation (GECC). GECC has provided financial
flexibility for GECAL's debt service by committing a US$130 million revolving credit line to GECAL. The ratings consider
GECAL's improving risk management control and conservative financial policy, including a leverage no greater than 10:1.
GECAL has seen delinquency rates decline since the first quarter of 1999 and reported a healthy Bt282 million net profit
at the year end after consecutive losses in 1997 and 1998. Economic expansion has encouraged more demand for automobiles
and has created good opportunities for well-established players in the hire purchase business that have sufficient sources of funds,
such as GECAL. However, these strengths are mitigated by concerns in one clause of GECAL's debenture covenants that allows
the company to merge, amalgamate or consolidate with any other of GECC's subsidiaries in Thailand without prior approval
of the debenture holders. This increases the risk profile of GECAL.
According to TRIS's report, following the global standard practices of its parent company, GECAL controlled risk by reducing
its overall delinquency rate for accounts 30 days plus past due from 27% as of December 1998 to 8% as of December 1999.
Based on the Bank of Thailand's three month past due criteria, GECAL's level of non-accrual loans as of December 1999
was 1.8% of its net receivables, which is considerably lower than the 17.8% level of all finance companies with hire purchase
business. Reducing loan loss provisions from Bt704 million in 1998 to Bt230 million as of December 1999 is evidence of
GECAL's improved asset quality. Net interest spread increased slightly from 5.3% to 5.5% as of December 1998 and 1999
respectively. GECAL expects to generate higher net income as its loan portfolio expands in accordance with the economic
rebound. Net income in 1999 was higher than its conservative forecast of Bt217 million.
TRIS reported that GECAL has available sources of third-party funds arranged by its parent company to absorb the anticipated
20% growth of car sales to 260,000 units in 2000. Most of its short-term borrowing is completely refinanced and fully hedged.
Furthermore, issuing debentures will provide the company with new funding at lower costs, thus enhancing its efficiency and
competitiveness.
Note: GE Capital Auto Lease Pcl (GECAL)
Company rating: Senior debt Affirmed at A
Issue rating: GECAL#1: Bt5,000 million senior debentures due 2003 A
"CreditUpdate" reviews ratings of companies or debt issues that have already been rated by TRIS. The CreditUpdate occurs
when new debt instruments are issued or if significant events have taken place that may impact a company's current ratings
or when current ratings are cancelled. The update includes information to supplement the previously published ratings.