TRIS Rating Co., Ltd. has announced a CreditAlert with "developing" designation for Advance Agro PLC (AA) following the actions that AA and its subsidiary in the Netherlands, Advance Agro Capital B.V., committed a technical default under indenture of the Guaranteed Notes issued in the United States, which could lead to a liquidity problem for AA as being the Guarantor for Advance Agro Capital B.V. and would trigger a cross default on AA's loans under the Master Override Agreement (MOA) it has with local banks in Thailand. The current company rating TRIS Rating has assigned to AA is "BBB".
TRIS Rating was informed on 15 November 2005 by AA that AA sent a notice to the Bank of New York, a Trustee of the 13% Guaranteed Notes due 2007, regarding prior technical default under indenture. The total outstanding amount of the Notes as of 30 October 2005 was around US$48 million. There are two general categories that the Issuer (Advance Agro Capital B.V.) and the Guarantor (AA) have overlooked that would constitute technical defaults under the covenants contained in the indenture. First, on several occasions, the Issuer has not filed Form 20-F with the Trustee following the de-registration of the notes with the US SEC. In addition, some of AA's affiliated party transactions have not been approved by a majority of disinterested board of directors nor have they been received a fairness option from an internationally recognized investment bank.
AA reported to TRIS Rating that until now, the company has punctually met all its debt obligations and it has not yet received any response from the Trustee regarding the letter that was sent to them on 21 October 2005. However, AA told TRIS Rating that, the Trustee arranged for a notice to be sent to the noteholders on 26 October 2005 advising them of the company's technical defaults. AA stated to TRIS Rating that the company does not expect the noteholders will make such call.
However, TRIS Rating considers that the failure to comply with these covenants could potentially enable noteholders to accelerate payment, which could possibly lead to a liquidity problem for AA. In addition, there is a cross-default clause in the Master Override Agreement (MOA) that the company has with three local banks which states that if AA defaults on any debt obligations worth more than US$2 million and if the situation is not remedied within 30 days after notice of such default is given to AA by a finance party, it will result in a cross-default on AA's loans under the MOA.
Currently, the company is also negotiating with a local bank to refinance its existing debts of Bt14,000 million. If AA receives this new facility, the company would have enough funding to back up the guaranteed notes. The company expects to finalize the refinancing soon. TRIS Rating will closely monitor AA's development for the remedy of these problems. -- End
TRIS Rating was informed on 15 November 2005 by AA that AA sent a notice to the Bank of New York, a Trustee of the 13% Guaranteed Notes due 2007, regarding prior technical default under indenture. The total outstanding amount of the Notes as of 30 October 2005 was around US$48 million. There are two general categories that the Issuer (Advance Agro Capital B.V.) and the Guarantor (AA) have overlooked that would constitute technical defaults under the covenants contained in the indenture. First, on several occasions, the Issuer has not filed Form 20-F with the Trustee following the de-registration of the notes with the US SEC. In addition, some of AA's affiliated party transactions have not been approved by a majority of disinterested board of directors nor have they been received a fairness option from an internationally recognized investment bank.
AA reported to TRIS Rating that until now, the company has punctually met all its debt obligations and it has not yet received any response from the Trustee regarding the letter that was sent to them on 21 October 2005. However, AA told TRIS Rating that, the Trustee arranged for a notice to be sent to the noteholders on 26 October 2005 advising them of the company's technical defaults. AA stated to TRIS Rating that the company does not expect the noteholders will make such call.
However, TRIS Rating considers that the failure to comply with these covenants could potentially enable noteholders to accelerate payment, which could possibly lead to a liquidity problem for AA. In addition, there is a cross-default clause in the Master Override Agreement (MOA) that the company has with three local banks which states that if AA defaults on any debt obligations worth more than US$2 million and if the situation is not remedied within 30 days after notice of such default is given to AA by a finance party, it will result in a cross-default on AA's loans under the MOA.
Currently, the company is also negotiating with a local bank to refinance its existing debts of Bt14,000 million. If AA receives this new facility, the company would have enough funding to back up the guaranteed notes. The company expects to finalize the refinancing soon. TRIS Rating will closely monitor AA's development for the remedy of these problems. -- End