TRIS Rating Downgrades Company rating on “LVMCS” to “BB” from “BB ”, with

TRIS Rating downgrades the rating on the guaranteed debentures of USD25.7 million issued by LVMC Holdings Singapore Pte. Ltd. (LVMCS, previously known as Kolao Holdings Singapore Pte. Ltd. (KHS)) to “BB” from “BB+”. At the same time, we maintain the outlook at “negative”. The changes reflect our downward revision on the company rating and outlook of the guarantor, LVMC Holdings (LVMC or “the Group”).

The debentures are jointly and severally guaranteed by LVMC and Kolao Developing Co., Ltd. (KDC). Therefore, the issue rating reflects the credit worthiness of LVMC and KDC. KDC, a wholly-owned subsidiary of LVMC, is classified as a “core” subsidiary of LVMC. Thus, KDC’s rating is equivalent to LVMC’s rating, or the Group’s rating.

Under the guarantee agreement, LVMC and KDC jointly and severally provide an unconditional and irrevocable guarantee to all amounts due under the debentures, including the principal amount of USD25.7 million and any interest accrued thereon and other related expenses. The guaranteed debentures rank at least equally with all other unsecured and unsubordinated obligations of LVMC and KDC.

LVMCS was incorporated in 2013 as a wholly-owned subsidiary of LVMC. LVMCS, through its subsidiaries, sells automobiles in Myanmar and Vietnam. As LVMCS’s business is currently small, the sources of interest and principal repayments to the debenture holders will come from the interest and principal repayments received from LVMC under the inter-company loan agreement between LVMCS and LVMC.

RATING OUTLOOK

The “negative” outlook reflects the rating outlooks on LVMC and KDC. TRIS Rating expects the highly competitive and uncertain business environments in which LVMC operates will continue and the recovery prospects of LVMC are uncertain. Also, LVMC was unable to comply with the financial covenant in the guaranteed debentures of USD25.7 million issued by LVMCS.

RATING SENSITIVITIES

The issue rating and/or outlook could be changed if the ratings and/or outlooks of the two guarantors change.

RELATED CRITERIA

- Rating Methodology – Corporate, 26 July 2019

- Key Financial Ratios and Adjustments, 5 September 2018

LVMC Holdings Singapore Pte. Ltd. (LVMCS)

Issue Rating:

KHS208A: USD25.7 million guaranteed debentures due 2020 BB

Rating Outlook: Negative

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TRIS Rating Downgrades Company rating on “LVMCS” to “BB” from “BB+”, with “Negative” Outlook