Bangkok--Feb 27--TRIS
Thai Rating and Information Services (TRIS) announced Friday
27 February 1998 in a CreditUpdate that it had lowered the rating of
5,000 million baht senior debentures of United Communication Industry
PLC (UCOM) to "BB" from "BBB+". The downgrade reflects a decrease in
the company's liquidity status resulting from less cash on hand and a
delay in an expected cash infusion from selling investments. The
lower liquidity level increases the company's financial risk just as
its debt burden has increased significantly from the baht
devaluation. The rating is somewhat offset by the continuous
significant revenues from its cellular operator subsidiary, Total
Access Communications Co., Ltd. (TAC) which has a strong competitive
position in the cellular industry.
According to TRIS's report, UCOM's unhedged foreign debts as
of 30 September 1997 included short-term loans of US$ 200 million,
long-term loans of US$ 360 million, and bonds and convertible bonds
of US$ 880 million. The company's total debt as of 30 September 1997
was a very high 60,000 million baht, a significant increase from the
first half of 1997 because of the baht devaluation. This debt level
increased its capital structure to a very high level of 89.5%, a
breach of its D/E ratio convenant which required the ratio be
maintained below 75%. Although, the bondholders meeting on 12
February 1998 allowed the company to mitigate the breach of the
covenant for one quarter by ignoring the financial covenant for the
third quarter of 1997, its capital structure still causes major
concern because of high exposure to foreign exchange risk.
Meanwhile, UCOM's liquidity level has decreased with cash on hand as
of 30 September 1997 dropping to 3,600 million baht from 4,300
million baht as of 30 June 1997. Also, an expected major cash
infusion from its sale of shares in TAC and foreign investments will
probably not materialize until the second half of 1998. Tight
liquidity will increase significantly the company's exposure to
financial risk particularly in the first half of 1998.
TRIS said that UCOM's rating was also removed from
CreditAlert where it was placed on 19 December 1997 following UCOM's
breach of a covenant of its 5,000-million-baht debentures with
warrants that requires the company to maintain a debt to equity ratio
of not more than 3 to 1.
Note: United Communication Industry PLC (UCOM) TRIS's rating
UCOM#1:5,000 mb sr debs due 2000 Downgraded to BB from BBB+
"CreditUpdate" reviews ratings of companies or debt issues that have
already been rated by TRIS. CreditUpdate occurs when new debt
instruments are issued or if significant events have taken place that
may impact a company's ratings or when ratings are cancelled. The
update includes information to supplement the previously published
ratings. End.
Thai Rating and Information Services (TRIS) announced Friday
27 February 1998 in a CreditUpdate that it had lowered the rating of
5,000 million baht senior debentures of United Communication Industry
PLC (UCOM) to "BB" from "BBB+". The downgrade reflects a decrease in
the company's liquidity status resulting from less cash on hand and a
delay in an expected cash infusion from selling investments. The
lower liquidity level increases the company's financial risk just as
its debt burden has increased significantly from the baht
devaluation. The rating is somewhat offset by the continuous
significant revenues from its cellular operator subsidiary, Total
Access Communications Co., Ltd. (TAC) which has a strong competitive
position in the cellular industry.
According to TRIS's report, UCOM's unhedged foreign debts as
of 30 September 1997 included short-term loans of US$ 200 million,
long-term loans of US$ 360 million, and bonds and convertible bonds
of US$ 880 million. The company's total debt as of 30 September 1997
was a very high 60,000 million baht, a significant increase from the
first half of 1997 because of the baht devaluation. This debt level
increased its capital structure to a very high level of 89.5%, a
breach of its D/E ratio convenant which required the ratio be
maintained below 75%. Although, the bondholders meeting on 12
February 1998 allowed the company to mitigate the breach of the
covenant for one quarter by ignoring the financial covenant for the
third quarter of 1997, its capital structure still causes major
concern because of high exposure to foreign exchange risk.
Meanwhile, UCOM's liquidity level has decreased with cash on hand as
of 30 September 1997 dropping to 3,600 million baht from 4,300
million baht as of 30 June 1997. Also, an expected major cash
infusion from its sale of shares in TAC and foreign investments will
probably not materialize until the second half of 1998. Tight
liquidity will increase significantly the company's exposure to
financial risk particularly in the first half of 1998.
TRIS said that UCOM's rating was also removed from
CreditAlert where it was placed on 19 December 1997 following UCOM's
breach of a covenant of its 5,000-million-baht debentures with
warrants that requires the company to maintain a debt to equity ratio
of not more than 3 to 1.
Note: United Communication Industry PLC (UCOM) TRIS's rating
UCOM#1:5,000 mb sr debs due 2000 Downgraded to BB from BBB+
"CreditUpdate" reviews ratings of companies or debt issues that have
already been rated by TRIS. CreditUpdate occurs when new debt
instruments are issued or if significant events have taken place that
may impact a company's ratings or when ratings are cancelled. The
update includes information to supplement the previously published
ratings. End.