TRIS Rating Co., Ltd. has assigned the company rating to TPI Polene PLC (TPIPL) at "BBB-". The rating reflects TPIPL's improved financial status after raising Bt11,000 million in new equity during January 2004. The rating also takes into consideration the increasing demand for cement in the domestic market, competitive production costs of TPIPL's cement plant, the company's strong position as the third largest cement producer in Thailand, and its position as the leader in low density polyethylene (LDPE) production in Thailand. However, the company's low financial flexibility, concerns raised in the 2003 auditor's report about the total amount of outstanding debt, and several unresolved lawsuits and contingent liabilities, which could cause the company's financial position to deteriorate in the event of adverse rulings by the court, negatively affect the company's rating. This rating is based on the assumption that the amount of debt repurchased at discount as stipulated in the Master Restructuring Agreement (MRA) will be approximately US$50 million and any additional debt repurchased will not be at a discount.
TRIS Rating reported that the flotation of the Thai baht, which resulted in the de facto devaluation, coupled with the contraction in demand for cement since the onset of the Asian financial crisis in 1997, badly hurt TPIPL's financial profile. As a result of soaring debt obligations and a sharp decline in domestic cement consumption, TPIPL defaulted on its debt obligations in 1997. It entered the business rehabilitation process in 2000 by signing an MRA with its creditors and conducting a Voluntary Debt Repurchase Program (VDRP) at the same year. Under the MRA, the company was obligated to repay its debts within five years, starting from 2000 to 2004, with a 3-year extendable period. In addition, the company, as plan administrator was required to raise at least US$180 million to buy back debts of US$219.42 million and accrued interest of US$30 million within 29 June 2001, which was later extended to 24 August 2001. The remaining accrued interest up to November 1999, totaling US$120 million, was to be converted into equity; however, under the mediation court procedure, the company is currently negotiating to have that amount of accrued interest forgiven by the creditors with no conversion into equity.
Though TPIPL was unable to raise funds within the specified period, it did fulfill other obligations in the MRA. In January 2004, the company successfully raised Bt11,000 million (approximately $285 million) and has deposited Bt5,549 million with the Central Bankruptcy Court to be used to buy back debts from its creditors. However, some creditors argued that the VDRP was no longer valid since the company was unable to complete its fund raising scheme within the specified timeframe and these creditors were unwilling to sell their loans to the company at a discount. The issues regarding the validity of the VDRP and the company serving as its own plan administrator are still in the mediation court process. Other outstanding lawsuits and contingencies include 47 million Euros that the Central Bankruptcy Court ordered TPIPL to pay to Krupp Polysius AG and Projecktall Industrieberatung GmbH regarding the supply of equipment for cement plant line 4 and Bt7,274 million that the Official Receiver ordered the company to repay to a certain bank.
After raising new equity funds in January 2004, TPIPL's auditor was able to express a qualified opinion on the company's 2003 financial statements. The auditor drew attention to the uncertainty surrounding the actual amount of debts outstanding and the use of unaudited financial statements from the company's subsidiaries. As claims by some creditors exceed the balances recorded in the audited statements of TPIPL, the rating assigned by TRIS Rating is based on the management's claim that the differences between the amount of debts claimed by the creditors and that which was reported by the company is the result of the use of different methods for calculation of interest. According to the company, the difference is approximately Bt160 million. Any significant change in the amount of debts reported by the company would impact the rating assigned by TRIS Rating.
TPIPL's ratio of operating income as a percentage of sales increased substantially, from 12.59% in 2002 to 23.35% in 2003. Upon the completion of its equity raising, the leverage ratio of the company improved significantly. Its debt to capitalization ratio is expected to decline from 77% at year-end 2003 to less than 60% in 2004. Although internal cash generation improved significantly, which helped funds from operation as a percentage of total debt to rise from only 1.22% in 2002 to around 9.13% in 2003, cash flow protection is considered low compared with other companies in TRIS Rating's portfolio due to the remaining high level of debt, TRIS Rating said.-- End
TPI Polene PLC (TPIPL)Company Rating: BBB-
TRIS Rating reported that the flotation of the Thai baht, which resulted in the de facto devaluation, coupled with the contraction in demand for cement since the onset of the Asian financial crisis in 1997, badly hurt TPIPL's financial profile. As a result of soaring debt obligations and a sharp decline in domestic cement consumption, TPIPL defaulted on its debt obligations in 1997. It entered the business rehabilitation process in 2000 by signing an MRA with its creditors and conducting a Voluntary Debt Repurchase Program (VDRP) at the same year. Under the MRA, the company was obligated to repay its debts within five years, starting from 2000 to 2004, with a 3-year extendable period. In addition, the company, as plan administrator was required to raise at least US$180 million to buy back debts of US$219.42 million and accrued interest of US$30 million within 29 June 2001, which was later extended to 24 August 2001. The remaining accrued interest up to November 1999, totaling US$120 million, was to be converted into equity; however, under the mediation court procedure, the company is currently negotiating to have that amount of accrued interest forgiven by the creditors with no conversion into equity.
Though TPIPL was unable to raise funds within the specified period, it did fulfill other obligations in the MRA. In January 2004, the company successfully raised Bt11,000 million (approximately $285 million) and has deposited Bt5,549 million with the Central Bankruptcy Court to be used to buy back debts from its creditors. However, some creditors argued that the VDRP was no longer valid since the company was unable to complete its fund raising scheme within the specified timeframe and these creditors were unwilling to sell their loans to the company at a discount. The issues regarding the validity of the VDRP and the company serving as its own plan administrator are still in the mediation court process. Other outstanding lawsuits and contingencies include 47 million Euros that the Central Bankruptcy Court ordered TPIPL to pay to Krupp Polysius AG and Projecktall Industrieberatung GmbH regarding the supply of equipment for cement plant line 4 and Bt7,274 million that the Official Receiver ordered the company to repay to a certain bank.
After raising new equity funds in January 2004, TPIPL's auditor was able to express a qualified opinion on the company's 2003 financial statements. The auditor drew attention to the uncertainty surrounding the actual amount of debts outstanding and the use of unaudited financial statements from the company's subsidiaries. As claims by some creditors exceed the balances recorded in the audited statements of TPIPL, the rating assigned by TRIS Rating is based on the management's claim that the differences between the amount of debts claimed by the creditors and that which was reported by the company is the result of the use of different methods for calculation of interest. According to the company, the difference is approximately Bt160 million. Any significant change in the amount of debts reported by the company would impact the rating assigned by TRIS Rating.
TPIPL's ratio of operating income as a percentage of sales increased substantially, from 12.59% in 2002 to 23.35% in 2003. Upon the completion of its equity raising, the leverage ratio of the company improved significantly. Its debt to capitalization ratio is expected to decline from 77% at year-end 2003 to less than 60% in 2004. Although internal cash generation improved significantly, which helped funds from operation as a percentage of total debt to rise from only 1.22% in 2002 to around 9.13% in 2003, cash flow protection is considered low compared with other companies in TRIS Rating's portfolio due to the remaining high level of debt, TRIS Rating said.-- End
TPI Polene PLC (TPIPL)Company Rating: BBB-