TRIS Rating Co., Ltd. has assigned a company rating of "A-" with "stable" outlook to Bangkok Expressway PLC (BECL). The rating reflects stable cash flow generation resulting from strong demand of traffic in Bangkok, the benefit from being the only toll road system linked to the First Stage Expressway System (FES) to form a comprehensive road network for Bangkok, and the proven track record of its management team. The rating also takes into consideration BECL's current debt profile, which is structured to match its debt servicing obligations with internal cash generation until debts mature. These strengths are partially offset by high leverage, uncertainty over future government transportation policies and the government's potential intervention in toll adjustments. The "stable" outlook reflects the expectation that traffic will remain strong, which will in turn produce adequate debt service coverage from annual net revenue. TRIS Rating believes that the management team will be able to smoothly operate the toll road in line with expectation. Significant expansion will be conservatively evaluated by BECL before any new investment is undertaken.
TRIS Rating reported that BECL developed and has operated the elevated Si Rat Expressway (SES) and its various extensions under a 30-year Build-Transfer-Operate (BTO) concession from the Expressway and Rapid Transit Authority (ETA). The SES was constructed as a six-lane elevated expressway for a total length of approximately 38.5 kilometers (km.). The SES is comprised of four sectors linked to the FES, which was constructed and has been operated by the ETA. The roads form a city ring road, with routes to the north, east, southeast and southwest creating a comprehensive road network for Bangkok residents and providing an alternative to the heavily congested free roads within central Bangkok and the suburbs. In addition, BECL incorporated a subsidiary, Northern Bangkok Expressway Co. Ltd. (NECL), to carry out construction and management of the Udon Ratthaya Expressway (Bang Pa In-Pak Kret Expressway), known as SES Sector C+, for a total length of 32 km. under a 30-year BTO concession with ETA. BECL currently holds a 53.33% stake in NECL.
TRIS Rating said the economic crisis in 1997, together with toll rate increase, caused the traffic on BECL's tollway drop by 7.2% in 1998 compared with the traffic in 1997. Traffic volumes have improved as the economy recovered, growing at an average rate of 6.9% per annum from 1999 to September 2004. Rapid growth in private car ownership has increased the traffic in Bangkok, which in turn has reduced average travel speed because the construction of new roads in Bangkok is not economically viable. Traffic congestion is a major factor enhancing demand for BECL's tollway. However, the company faces two potential risks: the lack of strong coordination of road infrastructure planning and implementation among the various responsible government agencies, and toll adjustment. Although the concession allows BECL to adjust toll rates every five years in line with Bangkok consumer price index (CPI), the company faced difficulty when attempting to increase tariffs, both in 1998 and 2003, because of the government's political interest.
BECL's outstanding debt as of 30 September 2004 stood at Bt32,672 million. This debt is a long-term syndicated loan, amortized monthly with final repayment in 2016. Debt servicing obligations have been well structured to match the company's internal cash generation. However, the company will face interest rate risk after 2008 when its interest rate will float. BECL's debt service coverage ratio has been in the range of 1.68-2.00 times during 2001-2003 and is expected to be in the range of 1.23-1.51 times during 2004-2015. The company's financial leverage is considered high compared with other corporate borrowers rated by TRIS Rating, with its debt to capitalization ratio at 70% at the end of September 2004. BECL's operating margin has been extremely strong at 83%-89% during the past six years but return on permanent capital was relatively low at 6%-7% for the same period, which is normal for toll road operators, TRIS Rating said. -- End
Bangkok Expressway PLC (BECL) Company Rating: A- Rating Outlook: Stable
TRIS Rating reported that BECL developed and has operated the elevated Si Rat Expressway (SES) and its various extensions under a 30-year Build-Transfer-Operate (BTO) concession from the Expressway and Rapid Transit Authority (ETA). The SES was constructed as a six-lane elevated expressway for a total length of approximately 38.5 kilometers (km.). The SES is comprised of four sectors linked to the FES, which was constructed and has been operated by the ETA. The roads form a city ring road, with routes to the north, east, southeast and southwest creating a comprehensive road network for Bangkok residents and providing an alternative to the heavily congested free roads within central Bangkok and the suburbs. In addition, BECL incorporated a subsidiary, Northern Bangkok Expressway Co. Ltd. (NECL), to carry out construction and management of the Udon Ratthaya Expressway (Bang Pa In-Pak Kret Expressway), known as SES Sector C+, for a total length of 32 km. under a 30-year BTO concession with ETA. BECL currently holds a 53.33% stake in NECL.
TRIS Rating said the economic crisis in 1997, together with toll rate increase, caused the traffic on BECL's tollway drop by 7.2% in 1998 compared with the traffic in 1997. Traffic volumes have improved as the economy recovered, growing at an average rate of 6.9% per annum from 1999 to September 2004. Rapid growth in private car ownership has increased the traffic in Bangkok, which in turn has reduced average travel speed because the construction of new roads in Bangkok is not economically viable. Traffic congestion is a major factor enhancing demand for BECL's tollway. However, the company faces two potential risks: the lack of strong coordination of road infrastructure planning and implementation among the various responsible government agencies, and toll adjustment. Although the concession allows BECL to adjust toll rates every five years in line with Bangkok consumer price index (CPI), the company faced difficulty when attempting to increase tariffs, both in 1998 and 2003, because of the government's political interest.
BECL's outstanding debt as of 30 September 2004 stood at Bt32,672 million. This debt is a long-term syndicated loan, amortized monthly with final repayment in 2016. Debt servicing obligations have been well structured to match the company's internal cash generation. However, the company will face interest rate risk after 2008 when its interest rate will float. BECL's debt service coverage ratio has been in the range of 1.68-2.00 times during 2001-2003 and is expected to be in the range of 1.23-1.51 times during 2004-2015. The company's financial leverage is considered high compared with other corporate borrowers rated by TRIS Rating, with its debt to capitalization ratio at 70% at the end of September 2004. BECL's operating margin has been extremely strong at 83%-89% during the past six years but return on permanent capital was relatively low at 6%-7% for the same period, which is normal for toll road operators, TRIS Rating said. -- End
Bangkok Expressway PLC (BECL) Company Rating: A- Rating Outlook: Stable