TRIS Rating Co., Ltd. has affirmed the company rating of Aeronautical Radio of Thailand Ltd. (AEROTHAI) at "AA" with "stable" outlook. The rating reflects the company's strategic importance to the country, its monopoly status as the only air traffic control service provider in Thailand, and its capable and experienced management team. The rating also reflects increasing demand for air transportation in the Asia-Pacific region in the medium to long term and the company's improving internal cash generation due to improving volume of traffic. In addition, implicit support from the government is a major factor enhancing the company's credit profile. These strengths are partially offset by an expected deterioration in cash flow protection due to increasing gearing ratio, which will remain high because of the need to make substantial future investment.
The "stable" outlook indicates that the high and rising debt level required to fund its new facilities at Suvarnabhumi Airport will weaken AEROTHAI's financial profile. However, the implicit support from the government, as it is the only operator to manage air traffic control of the country, the company's strong operating profile and its improving internal cash generation support the current rating with very limited downside pressure. AEROTHAI's outlook and/or rating will be revised after its operation at the new airport is running smoothly and it is able to sustain improving operating performance.
TRIS Rating said that AEROTHAI will incur substantial debt-financed capital expenditures over the next two years, with funds earmarked for the construction of a new air traffic control complex and air traffic control system at Suvarnabhumi Airport. Total investment cost of AEROTHAI for facilities at the new airport is approximately Bt2,990 million. The company's total debt to capitalization ratio, therefore, will surpass 80% in 2005. Its funds from operations (FFO) to total debt ratio is likely to deteriorate even though the company is expected to achieve strong operating performance. Although AEROTHAI's financial status will get weaker in the short term, the company maintains a strong credit profile because government support enhances its creditworthiness. - End
Aeronautical Radio of Thailand Ltd. (AEROTHAI) Company Rating: Affirmed at AA Rating Outlook: Stable