TRIS Affirms a "A-" Rating for LSPV's Corporate
Thai Rating and Information Services Co., Ltd. (TRIS) announced Thursday 31 August 2000 that it has affirmed the "A-" corporate credit rating of LSPV Co., Ltd. (LSPV). The affirmed rating reflects the strong value of LSPV's collateral derived from market environment even after the liquor industry liberalization, sufficient credit enhancement, an appropriate legal and payment structure that provides for the timely payment of interest and ultimate repayment of principal, and the robust business position of Sang Som group after the liquor industry liberalization. According to TRIS's report, LSPV is a special purpose company owned by Sang Som Co., Ltd. (Sang Som) and its six subsidiaries. LSPV was established in 1998 to raise funds from secured loans and debentures to purchase liquors produced under Sang Som group's exclusive concessions before 1 January 2000. Through the 1990s, liquor sales grew at a steady 2.7% per annum, from 34 million taes in 1991 to 38 million taes in 1996. After 1996, this trend reversed, showing a steady decline to 32 million taes in 1999 because of the effects of the economic recession and a considerable growth in beer consumption. Despite the declining market, sales are sufficient to absorb the collateral of 26.5725 million taes, which account for 83% of total market demand. Though liberalization of the liquor industry began in 2000, Sang Som group will continue to dominate the industry for several years. Having bought 12 formerly government-owned distilleries in 1999, the group commands a major share of the spirits market and benefits from its huge stockpiled inventory. Also, the group benefits from leveraging its existing competitive advantages: low production costs, strong distribution networks, efficient marketing skills, and well-recognized brand names. Based on assumptions from its post-default scenario test, TRIS said that LSPV's estimated recovery value would be sufficient to repay all accrued interest and principal in the event of default. The affirmed rating addresses the payment of interest and principal, excluding the likelihood of prepayment, and is based primarily on the probability of default and loss in the event of the company's insolvency. LSPV Co., Ltd. (LSPV) Company Rating Senior debt Affirmed at A-