TRIS Rating Co., Ltd. has assigned a preliminary rating to the proposed up to Bt1,000 million senior secured debentures of Premier Resort Krabi Co., Ltd. (PRK) at "BBB+". The final rating will be effective after all documents needed to issue secured debentures are signed. The rating is enhanced by well secured collateral and provisions that protect the company's cash flow for the debentureholders. The ratio of collateral value to outstanding debenture is 1.67 time at the issuance date. The rating reflects the extensive network and capable management of its operator, Starwood Hotels & Resorts Worldwide, Inc., PRK's ownership of a well-recognized premium brand hotel, Rayavadee, and medium and long term good prospects of the hotel industry in Thailand. These strengths are constrained by the intense competition in the hotel sector, the single operating asset, and the short track record of the operator at the company's property. The rating is based on the assumption that the company has no plans to have substantial investment.
TRIS Rating reported that PRK owns the high-end, 100-key resort Rayavadee on Pra Nang peninsula, Krabi, in southern Thailand. The resort is spread over 26 acres (60 rai) of coconut trees surrounded by towering limestone cliffs and three national park beaches, one of which is rated among the most beautiful beaches in Thailand. PRK lacks diversification because it has only a single property. Any adverse impacts on Rayavadee will significantly influence PRK's cash flow. Rayavadee was opened in 1993 as a five-star hotel managed by a well-known Thai operator. The company, however, broke up with the operator in 1999 and took over management of its resort in late 1999.
PRK appointed Starwood to manage the resort in February 2002. The franchiser put the unique property in its Luxury Collection brand, which is distinguished by high quality services, magnificent locations, and elegant designs, styles and surroundings. Starwood is one of the top-10 hotel operators worldwide in terms of the number of rooms under its management. In addition to its effective reservation network system and highly regarded guests retention programs, Starwood has helped the company improve its property management system and has provided extensive training programs to the company's employees.
TRIS Rating said under Starwood's management, the hotel's occupancy rate (OR) has improved from 42.0% during the first nine months of 2001 to 46.5% for the same period in 2002 while its average room rate (ARR) has remained stable. Revenue per available room (RevPAR) increased by 12% during the same period. However, the performance in terms of RevPAR has lagged behind its budget by about 16%. Therefore, the success of Starwood's management team needs time to be proved.
Although foreign tourist arrivals in 2002 are not likely to reach a growth rate as the government projected because of the negative impact of terrorist activities in various countries, the medium and long term prospects for the Thai tourism industry continue to be favorable. Foreign tourist arrivals during the first eight months of 2002 reached 7.1 million compared with 6.7 million for the same period in 2001, or up by 5.8%. Strong government support in promoting and creating awareness among potential tourists is one of the major critical factors increasing the competitiveness of various tourism destinations in Thailand. Competition among hotel operators is intense, especially following unexpected events such as terrorist actions therefore pricing continues to be one of a prime marketing tool used by many hotels to attract guests. PRK's cash flow protection is slightly lower than average when compared with operators in other industries. Funds from operation (FFO) as a percent of total debt was negative in 1997 and 1998 before increasing to 2.2% in 1999 and improved to 14.3% in 2001. Earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage also improved from 0.4 times in 1997 to 3 times in 2001, TRIS Rating said. -- End
Premier Resort Krabi Co., Ltd. (PRK) Issue Rating: PRK#1: Up to Bt1,000 million senior secured debentures due 2007 BBB+
TRIS Rating reported that PRK owns the high-end, 100-key resort Rayavadee on Pra Nang peninsula, Krabi, in southern Thailand. The resort is spread over 26 acres (60 rai) of coconut trees surrounded by towering limestone cliffs and three national park beaches, one of which is rated among the most beautiful beaches in Thailand. PRK lacks diversification because it has only a single property. Any adverse impacts on Rayavadee will significantly influence PRK's cash flow. Rayavadee was opened in 1993 as a five-star hotel managed by a well-known Thai operator. The company, however, broke up with the operator in 1999 and took over management of its resort in late 1999.
PRK appointed Starwood to manage the resort in February 2002. The franchiser put the unique property in its Luxury Collection brand, which is distinguished by high quality services, magnificent locations, and elegant designs, styles and surroundings. Starwood is one of the top-10 hotel operators worldwide in terms of the number of rooms under its management. In addition to its effective reservation network system and highly regarded guests retention programs, Starwood has helped the company improve its property management system and has provided extensive training programs to the company's employees.
TRIS Rating said under Starwood's management, the hotel's occupancy rate (OR) has improved from 42.0% during the first nine months of 2001 to 46.5% for the same period in 2002 while its average room rate (ARR) has remained stable. Revenue per available room (RevPAR) increased by 12% during the same period. However, the performance in terms of RevPAR has lagged behind its budget by about 16%. Therefore, the success of Starwood's management team needs time to be proved.
Although foreign tourist arrivals in 2002 are not likely to reach a growth rate as the government projected because of the negative impact of terrorist activities in various countries, the medium and long term prospects for the Thai tourism industry continue to be favorable. Foreign tourist arrivals during the first eight months of 2002 reached 7.1 million compared with 6.7 million for the same period in 2001, or up by 5.8%. Strong government support in promoting and creating awareness among potential tourists is one of the major critical factors increasing the competitiveness of various tourism destinations in Thailand. Competition among hotel operators is intense, especially following unexpected events such as terrorist actions therefore pricing continues to be one of a prime marketing tool used by many hotels to attract guests. PRK's cash flow protection is slightly lower than average when compared with operators in other industries. Funds from operation (FFO) as a percent of total debt was negative in 1997 and 1998 before increasing to 2.2% in 1999 and improved to 14.3% in 2001. Earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage also improved from 0.4 times in 1997 to 3 times in 2001, TRIS Rating said. -- End
Premier Resort Krabi Co., Ltd. (PRK) Issue Rating: PRK#1: Up to Bt1,000 million senior secured debentures due 2007 BBB+