TRIS Rating Co., Ltd. has downgraded the company rating of Nava Leasing PLC (NVL) to "BBB-" from "BBB" and has also downgraded the issue rating of its Bt1,200 million senior secured debentures (NVL063A) to "BBB" from "BBB+". The rating outlook remains "negative". The ratings reflect NVL's weak liquidity position because there is a significant amount of short-term debt that will be matured within the next four months. The company has been well capitalized reflecting in its ratio of equity to total assets at 30.6% at the end of June 2005. However, all of NVL's borrowings are short-term which results in a significant asset-liability mismatch. The ratings also take into consideration the intense competition in the hire purchase industry, NVL's high average cost of funds compared with other major players, and its customer concentration risk. Moreover, an uncertain economic situation, continuously high oil prices, and rising interest rates may negatively impact the demand for automobiles and affect installment payments from customers. The new management team's success in changing NVL's business strategy to focus on the retail automobile financing business (both new car and used car) and to build up its network and business in provincial areas needs time to be proved.
While the "negative" outlook is based on the liquidity constraint during the next six months. If the company cannot show concrete evidence of liquidity back-up for the short-term debts coming due, the rating will be further downgraded.
TRIS Rating reported that NVL is a small automobile hire purchase company compared with major leasing companies and financial institutions. A higher cost of funds compared with its peers has made NVL less competitive in the retail business, therefore NVL expanded to tap corporate customers, which has raised concerns over the company's customer concentration risk. To diversify risk and get higher yield, the new management team changed the company's policy to focus on retail automobile financing. Although, used car hire purchase loans provide higher yield, they normally have lower credit quality than new car hire purchase loans. TRIS Rating will closely monitor the policy of NVL's management to make a balance between profitability, which is targeted to be higher, and asset quality. The new management team took charge in mid-2005. Although the new management team has extensive experience in automobile financing, automobile distribution, and retail business, the success remains to be seen.
TRIS Rating said that NVL's financial status clearly showed the mismatch of its assets and liabilities. The company has debt repayments scheduled in September 2005 (Bt620 million) and December 2005 (Bt450 million). Management plans to refinance the debts coming due mostly with bank borrowings and partly from equity raising. -- End
Nava Leasing PLC (NVL) Company Rating: Downgraded to "BBB-" from "BBB" Issue Rating: NVL063A: Bt1,200 million senior secured debentures due 2006 Downgraded to "BBB" from "BBB+" Rating Outlook: Negative
While the "negative" outlook is based on the liquidity constraint during the next six months. If the company cannot show concrete evidence of liquidity back-up for the short-term debts coming due, the rating will be further downgraded.
TRIS Rating reported that NVL is a small automobile hire purchase company compared with major leasing companies and financial institutions. A higher cost of funds compared with its peers has made NVL less competitive in the retail business, therefore NVL expanded to tap corporate customers, which has raised concerns over the company's customer concentration risk. To diversify risk and get higher yield, the new management team changed the company's policy to focus on retail automobile financing. Although, used car hire purchase loans provide higher yield, they normally have lower credit quality than new car hire purchase loans. TRIS Rating will closely monitor the policy of NVL's management to make a balance between profitability, which is targeted to be higher, and asset quality. The new management team took charge in mid-2005. Although the new management team has extensive experience in automobile financing, automobile distribution, and retail business, the success remains to be seen.
TRIS Rating said that NVL's financial status clearly showed the mismatch of its assets and liabilities. The company has debt repayments scheduled in September 2005 (Bt620 million) and December 2005 (Bt450 million). Management plans to refinance the debts coming due mostly with bank borrowings and partly from equity raising. -- End
Nava Leasing PLC (NVL) Company Rating: Downgraded to "BBB-" from "BBB" Issue Rating: NVL063A: Bt1,200 million senior secured debentures due 2006 Downgraded to "BBB" from "BBB+" Rating Outlook: Negative