TRIS Rating Co., Ltd. has lowered the company rating of King Power Duty Free Co., Ltd. (KPD) to “BBB-” from “BBB+” with “negative” outlook. The two-notch downgrade reflects KPD’s lower financial flexibility due to a pending dispute between the company and its concessioner, Airports of Thailand PLC (AOT), concerning duty free shop concession. Although KPD has been able to reschedule debt repayments with major lenders to match with its internal cash generation, new credit facilities will certainly not be forthcoming as long as the dispute with AOT remains unresolved. The rating is based on the assumption that KPD will be granted a protection by the court and continues to operate the airport duty free business during the legal process.
The “negative” outlook reflects the uncertainty of KPD’s financial flexibility and its tight liquidity. The rating will be revised downward if KPD is unable to continue to receive supports from suppliers and its two existing major lenders, or its performance is substantially weakened.
TRIS Rating reported that after the AOT’s board of directors resolved to nullify the concession signed between the company and AOT dated 20 April 2004, KPD’s liquidity and financial flexibility provided by financial institutions and investors have been reduced substantially. KPD sued AOT on 4 June 2007, demanding a compensation of Bt48 billion for nullifying the duty free contract. TRIS Rating will continue to monitor the development of the court process. If KPD loses the concession, its financial and business profiles are expected to weaken substantially, which will cause a significantly negative impact on the rating. At the moment, the outcome of the dispute remains uncertain.
TRIS Rating said that during the first four months of 2007, KPD’s monthly sales at Suvarnabhumi International Airport were between Bt1,000-Bt1,200 million. However, sales during the next few months are expected to be lowered due to the low travel season. In addition, sales after May 2007 may be negatively impacted from new safety measures implemented by the Department of Civil Aviation. The new regulation, which was effective on 1 June 2007, prohibits passengers from carrying more than 100 mls of liquid, gel, or aerosol on a plane. However, sales in the fourth quarter of 2007 are expected to increase due to the high travel season. -- End
King Power Duty Free Co., Ltd. (KPD)
Company Rating: Downgraded to BBB- from BBB+
Rating Outlook: Negative
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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 “negative” outlook reflects the uncertainty of KPD’s financial flexibility and its tight liquidity. The rating will be revised downward if KPD is unable to continue to receive supports from suppliers and its two existing major lenders, or its performance is substantially weakened.
TRIS Rating reported that after the AOT’s board of directors resolved to nullify the concession signed between the company and AOT dated 20 April 2004, KPD’s liquidity and financial flexibility provided by financial institutions and investors have been reduced substantially. KPD sued AOT on 4 June 2007, demanding a compensation of Bt48 billion for nullifying the duty free contract. TRIS Rating will continue to monitor the development of the court process. If KPD loses the concession, its financial and business profiles are expected to weaken substantially, which will cause a significantly negative impact on the rating. At the moment, the outcome of the dispute remains uncertain.
TRIS Rating said that during the first four months of 2007, KPD’s monthly sales at Suvarnabhumi International Airport were between Bt1,000-Bt1,200 million. However, sales during the next few months are expected to be lowered due to the low travel season. In addition, sales after May 2007 may be negatively impacted from new safety measures implemented by the Department of Civil Aviation. The new regulation, which was effective on 1 June 2007, prohibits passengers from carrying more than 100 mls of liquid, gel, or aerosol on a plane. However, sales in the fourth quarter of 2007 are expected to increase due to the high travel season. -- End
King Power Duty Free Co., Ltd. (KPD)
Company Rating: Downgraded to BBB- from BBB+
Rating Outlook: Negative
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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.