TRIS Rating Co., Ltd. has assigned a “A-” rating to the proposed up to Bt7,500 million senior debentures of Bangkok Expressway PLC (BECL). At the same time, TRIS Rating has affirmed the company rating of BECL at “A” with “stable” outlook. The lower rating of the debentures reflects lower priority claims of the debenture holders compared with the existing secured creditors. However, if the status of all creditors ranks pari passu or the proportion of secured debts to total asset is down to a certain level, the issue rating shall be the same as the company rating. BECL’s corporate credit rating is based on the continuous increase in traffic volume on the expressways despite the rising popularity of the mass transit systems, stable cash flow generation supported by established traffic volume, the benefit of 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 management. The rating also takes into consideration the company’s current debt profile, which is structured to match debt servicing obligations with internal cash generation until the 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 proceeds from BECL’s debentures will be used to partially refinance the company’s existing debt as part of a refinancing program to mitigate interest rate volatility.
The “stable” outlook reflects the expectation that the traffic on the expressways will remain strong, which will in turn produce BECL’s sufficient debt service coverage from annual revenue. TRIS Rating also expects the company to maintain good service and conditions on toll roads to attract new commuters. In addition, should the company decide to explore new business opportunities, its financial structure should not deteriorate from the current position.
TRIS Rating reported that BECL built and operates the elevated Si Rat Expressway (the Second Stage Expressway System or the SES) and its various extensions under 30-year Build-Transfer-Operate (BTO) concessions from the Expressway and Rapid Transit Authority of Thailand (ETA). The SES was constructed as a six-lane elevated expressway for a total length of approximately 38.5 kilometers (km.). The SES comprises 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 that provides 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 the ETA. BECL currently holds 53.33% of NECL’s registered capital.
TRIS Rating said, BECL’s financial performance depends on traffic volume on the expressways, the toll rate, and operating costs. Traffic volume on the expressways has continuously increased during the past
few years despite the tremendous increase in gasoline prices during 2005-2006. Traffic volume rose by
2.29% in 2005 and 3.45% in 2006 to an average of 944,572 cars per day, compared with an average of 913,098 cars per day in 2005. TRIS Rating expects that the medium and long term growth of the Thai economy, the expansion of residential housing into the areas surrounding the city, and heavy traffic congestion on free roads from construction of mass transit systems will continue to support demand for toll roads in the future. BECL's operating performance is expected to remain sound due to continued traffic growth, toll rate adjustments even at moderate levels, and the management team’s ability to conservatively manage operating costs.
BECL’s toll revenue in the first quarter of 2007 increased by 5.4% from the same period of the previous year. The increase was mainly due to a robust increase of traffic volume on Sector D resulting from the opening of Suvarnabhumi International Airport. However, net profit was down by 8.42% to Bt378 million from Bt413 million in the first quarter of 2006 because the company’s borrowing rate rose from fixed rate at 4% to 5% in October 2006. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio slightly dropped from 4.85 times in 2006 to 4.56 times for the first three months of 2007. Starting in October 2008, BECL will face interest rate risk as the majority borrowing rate will change from a fixed rate to a floating rate at MLR-2%. The company is considering various alternatives to mitigate the interest rate risk, including issuing addition debentures, and negotiating with existing creditors to refinance the existing debt.
BECL’s toll revenue in the first quarter of 2007 increased by 5.4% from the same period of the previous year. The increase was mainly due to a robust increase of traffic volume on Sector D resulting from the opening of Suvarnabhumi International Airport. However, net profit was down by 8.42% to Bt378 million from Bt413 million in the first quarter of 2006 because the company’s borrowing rate rose from fixed rate at 4% to 5% in October 2006. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio slightly dropped from 4.85 times in 2006 to 4.56 times for the first three months of 2007. Starting in October 2008, BECL will face interest rate risk as the majority borrowing rate will change from a fixed rate to a floating rate at MLR-2%. The company is considering various alternatives to mitigate the interest rate risk, including issuing addition debentures, and negotiating with existing creditors to refinance the existing debt.
As of May 2007, BECL’s total debt was Bt27,283 million, down by Bt1,100 million from Bt28,383 million at the end of 2006 due to monthly repayments. The total debt to capitalization ratio slightly improved from 64.64% in 2006 to 63.78% as of March 2007. Though BECL’s leverage is quite high, it is mitigated by relatively stable and predictable cash flow generation supported by established traffic volume. -- End
Bangkok Expressway PLC (BECL)
Company Rating: Affirmed at A
Issue Rating:
Up to Bt7,500 million senior debentures due 2014 A-
Rating Outlook: Stable
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Copyright 2007, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.
The “stable” outlook reflects the expectation that the traffic on the expressways will remain strong, which will in turn produce BECL’s sufficient debt service coverage from annual revenue. TRIS Rating also expects the company to maintain good service and conditions on toll roads to attract new commuters. In addition, should the company decide to explore new business opportunities, its financial structure should not deteriorate from the current position.
TRIS Rating reported that BECL built and operates the elevated Si Rat Expressway (the Second Stage Expressway System or the SES) and its various extensions under 30-year Build-Transfer-Operate (BTO) concessions from the Expressway and Rapid Transit Authority of Thailand (ETA). The SES was constructed as a six-lane elevated expressway for a total length of approximately 38.5 kilometers (km.). The SES comprises 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 that provides 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 the ETA. BECL currently holds 53.33% of NECL’s registered capital.
TRIS Rating said, BECL’s financial performance depends on traffic volume on the expressways, the toll rate, and operating costs. Traffic volume on the expressways has continuously increased during the past
few years despite the tremendous increase in gasoline prices during 2005-2006. Traffic volume rose by
2.29% in 2005 and 3.45% in 2006 to an average of 944,572 cars per day, compared with an average of 913,098 cars per day in 2005. TRIS Rating expects that the medium and long term growth of the Thai economy, the expansion of residential housing into the areas surrounding the city, and heavy traffic congestion on free roads from construction of mass transit systems will continue to support demand for toll roads in the future. BECL's operating performance is expected to remain sound due to continued traffic growth, toll rate adjustments even at moderate levels, and the management team’s ability to conservatively manage operating costs.
BECL’s toll revenue in the first quarter of 2007 increased by 5.4% from the same period of the previous year. The increase was mainly due to a robust increase of traffic volume on Sector D resulting from the opening of Suvarnabhumi International Airport. However, net profit was down by 8.42% to Bt378 million from Bt413 million in the first quarter of 2006 because the company’s borrowing rate rose from fixed rate at 4% to 5% in October 2006. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio slightly dropped from 4.85 times in 2006 to 4.56 times for the first three months of 2007. Starting in October 2008, BECL will face interest rate risk as the majority borrowing rate will change from a fixed rate to a floating rate at MLR-2%. The company is considering various alternatives to mitigate the interest rate risk, including issuing addition debentures, and negotiating with existing creditors to refinance the existing debt.
BECL’s toll revenue in the first quarter of 2007 increased by 5.4% from the same period of the previous year. The increase was mainly due to a robust increase of traffic volume on Sector D resulting from the opening of Suvarnabhumi International Airport. However, net profit was down by 8.42% to Bt378 million from Bt413 million in the first quarter of 2006 because the company’s borrowing rate rose from fixed rate at 4% to 5% in October 2006. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio slightly dropped from 4.85 times in 2006 to 4.56 times for the first three months of 2007. Starting in October 2008, BECL will face interest rate risk as the majority borrowing rate will change from a fixed rate to a floating rate at MLR-2%. The company is considering various alternatives to mitigate the interest rate risk, including issuing addition debentures, and negotiating with existing creditors to refinance the existing debt.
As of May 2007, BECL’s total debt was Bt27,283 million, down by Bt1,100 million from Bt28,383 million at the end of 2006 due to monthly repayments. The total debt to capitalization ratio slightly improved from 64.64% in 2006 to 63.78% as of March 2007. Though BECL’s leverage is quite high, it is mitigated by relatively stable and predictable cash flow generation supported by established traffic volume. -- End
Bangkok Expressway PLC (BECL)
Company Rating: Affirmed at A
Issue Rating:
Up to Bt7,500 million senior debentures due 2014 A-
Rating Outlook: Stable
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Copyright 2007, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.