Thai Rating and Information Services Co., Ltd. (TRIS) announced that it has affirmed the ratings of Seacon Development Co., Ltd.'s (SEACON) Bt650 million and Bt550 million senior secured debentures at "BBB+". The ratings reflect the adequate collateral value of SEACON's shopping center, its high quality retail property and its flexible management strategy. While these strengths are partially offset by a high concentration risk because the company has only one income producing property, intensifying competition in the retail industry -- especially the aggressive expansion of modern trade outlets owned by big foreign operators -- and the slowing economy. The ratings also incorporate the company's slightly improved financial performance.
TRIS said that these two debenture issues are secured by SEACON's shopping center, which according to American Appraisal (Thailand) Ltd. had as of September 2000 a fair market value of Bt3,750 million. The debentureholders are adequately protected due to a quite low loan to collateral value of 30% as of September 2001, which includes a Bt50 million overdraft facility. The issue ratings also reflect, in case of the occurrence of events of default, the secured debentureholders' right to direct access to the rental and service income from shopping center tenants. However, in the case of a default, TRIS is concerned about the illiquidity of the collateral.
SEACON was incorporated in 1990 as a 68:32 joint venture between the Sosothikul family and five financial institutions to develop and operate Seacon Square Shopping and Entertainment Center. This shopping center is in a good location and has a strong, diversified tenant base including major anchors. In the first nine months of 2001, the rental and service income from the largest tenant was less than 6% of total rental and service income, and the top-10 tenants contributed 22% of total rental and service income. However, having only one income producing property exposes SEACON to high concentration risk and partially offsets its asset quality. While competition in the retail industry is intense, especially from superstores that have been aggressively launching new outlets in the market over the past few years and are expected to launch many new projects in the future. Furthermore, key economic indicators in the first half of 2001 pointed to slower economic growth which will affect consumer spending. However, SEACON's management strategy is flexible and can adjust its tenant mix to compete in a rapidly changing environment and serve its customer requirements, TRIS said.
SEACON's operating income before depreciation and amortization as a percentage of rental and service income and sales improved from 57.9% in 2000 to 63.1% in the first nine months of 2001. The company's pretax return on permanent capital increased from 6.5% in 2000 to 8.3% (non-annualized) in the first nine months of 2001. Funds from operation to total debt and earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratios have been sufficient at 19.2% (non-annualized) and 4.7 times respectively for the first nine months of 2001. As of September 2001, the company's total debt to capitalization ratio stood at 34%. However, the company will likely need to raise between Bt170 million and Bt200 million from external sources at the beginning of 2006 to make the final principal repayment on the senior secured debentures "SCON061A", because its internal cash generation will not be sufficient in that period, TRIS said.
Seacon Development Co., Ltd. (SEACON) Issue Ratings: SCON047A: Bt650 million senior secured debentures due 2004 Affirmed at BBB+ SCON061A: Bt550 million senior secured debentures due 2006 Affirmed at BBB+
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TRIS said that these two debenture issues are secured by SEACON's shopping center, which according to American Appraisal (Thailand) Ltd. had as of September 2000 a fair market value of Bt3,750 million. The debentureholders are adequately protected due to a quite low loan to collateral value of 30% as of September 2001, which includes a Bt50 million overdraft facility. The issue ratings also reflect, in case of the occurrence of events of default, the secured debentureholders' right to direct access to the rental and service income from shopping center tenants. However, in the case of a default, TRIS is concerned about the illiquidity of the collateral.
SEACON was incorporated in 1990 as a 68:32 joint venture between the Sosothikul family and five financial institutions to develop and operate Seacon Square Shopping and Entertainment Center. This shopping center is in a good location and has a strong, diversified tenant base including major anchors. In the first nine months of 2001, the rental and service income from the largest tenant was less than 6% of total rental and service income, and the top-10 tenants contributed 22% of total rental and service income. However, having only one income producing property exposes SEACON to high concentration risk and partially offsets its asset quality. While competition in the retail industry is intense, especially from superstores that have been aggressively launching new outlets in the market over the past few years and are expected to launch many new projects in the future. Furthermore, key economic indicators in the first half of 2001 pointed to slower economic growth which will affect consumer spending. However, SEACON's management strategy is flexible and can adjust its tenant mix to compete in a rapidly changing environment and serve its customer requirements, TRIS said.
SEACON's operating income before depreciation and amortization as a percentage of rental and service income and sales improved from 57.9% in 2000 to 63.1% in the first nine months of 2001. The company's pretax return on permanent capital increased from 6.5% in 2000 to 8.3% (non-annualized) in the first nine months of 2001. Funds from operation to total debt and earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratios have been sufficient at 19.2% (non-annualized) and 4.7 times respectively for the first nine months of 2001. As of September 2001, the company's total debt to capitalization ratio stood at 34%. However, the company will likely need to raise between Bt170 million and Bt200 million from external sources at the beginning of 2006 to make the final principal repayment on the senior secured debentures "SCON061A", because its internal cash generation will not be sufficient in that period, TRIS said.
Seacon Development Co., Ltd. (SEACON) Issue Ratings: SCON047A: Bt650 million senior secured debentures due 2004 Affirmed at BBB+ SCON061A: Bt550 million senior secured debentures due 2006 Affirmed at BBB+
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