TRIS Rating Co., Ltd. has affirmed the company rating of EASY BUY PLC at “BBB” and the ratings of EASY BUY’s guaranteed debentures at “AA” with “stable” outlook. The company rating reflects EASY BUY’s strong market position in Thailand’s non-bank consumer finance businesses and strong supports from its parent and major shareholders. The rating is constrained by EASY BUY’s low capitalization and an unfavourable economic and operating environment, which might limit the company’s business growth and profitability. The issue ratings reflect a full guarantee by EASY BUY’s parent company, ACOM Co., Ltd., a company rated “A2” with a “stable” outlook by Moody’s Investor Service (Moody’s) and “BBB+” with a “negative” outlook by Standard & Poor’s (S&P). ACOM’s rating is supported by its strong market position in the consumer finance business, a sound and experienced management team and more diversified businesses. These strengths are constrained by a fiercely competitive environment and regulatory risk, which negatively affect the performance of Japanese non-bank consumer finance companies.
EASY BUY’s “stable” outlook reflects TRIS Rating’s expectation that the company can deliver the financial performance expected and can sustain its position in the non-bank consumer finance business due to its track record, good brand recognition, and strong support from its major shareholders. The company’s acceptable risk management systems are expected to help mitigate future downside risk from adverse changes in the business environment.
The “stable” outlook for EASY BUY’s guaranteed debentures reflects TRIS Rating’s expectation that ACOM will be able to sustain its solid position in the non-bank consumer finance market despite the unfavorable regulatory controls and limited market opportunities in the Japanese consumer finance industry. The outlook also reflects ACOM’s ability to improve its financial performance after implementing a new business model. The new model brings more diverse sources of income and efficient cost management to compensate for the narrowing interest margin due to a cap on interest rates.
TRIS Rating reported that under the guarantee agreement, which is governed by the laws of Japan, the guarantor irrevocably and unconditionally guarantees to promptly make full payments of obligations of the rated debentures in the event that EASY BUY does not pay. The guarantee’s obligations will be reinstated if the payments made by EASY BUY are recaptured as a result of the issuer filing bankruptcy. Furthermore, if there is any merger or consolidation of ACOM, the successor of ACOM shall assume these guaranteed obligations. If the guarantor fails to pay the amount due after receiving notice, the debentureholders’ representative can commence legal action against the guarantor in the commercial court, in Japan, for the defaulted amount. The obligations of the guarantor under this guarantee agreement rank equally with other unsecured and unsubordinated debts of the guarantor.
As of March 2008, EASY BUY’s loan receivables made up 5% of ACOM’s consolidated receivables, up continuously from 3% at the end of FY2004 (ending March 2004). The amount of EASY BUY’s liabilities guaranteed by ACOM totalled 61,897 million yen as of March 2008, representing 13% of ACOM’s total shareholders’ equity, up from only 1% in FY2004. EASY BUY is ACOM’s first overseas subsidiary in Southeast Asia, and figures significantly in ACOM’s strategy to be a major regional player in the consumer finance industry. ACOM has shown a strong commitment to EASY BUY, providing financial and business support by passing along technology and business practices know-how, as well as developing new products for the Thai market.
TRIS Rating said, the experience of over ten years in the non-bank consumer finance industry has provided EASY BUY with a sufficient track record and good brand recognition. However, strong financial and business support from the parent company is crucial for EASY BUY’s future market position and to sustain growth. Though the nature of its business, providing small loans per customer to a large number of customers, helps diversify risk, the company is still subject to regulatory risk.
Asset quality is a crucial factor of EASY BUY’s credit profile as the company has been pressured by its low capitalization and changing business factors. EASY BUY has adopted many of ACOM’s business operation and risk management tools, including a modern credit-scoring model and effective vendor and information management systems, plus ACOM’s loan collection methods and standards to ensure asset quality control. However, EASY BUY had high provisioning costs (bad debts and doubtful accounts) during 2005-2007 due to high NPLs in the motorcycle hire-purchase business. NPLs were also high during a controversial period when a new interest rate cap was implemented. As a result, EASY BUY reported a loss of Bt113 million in 2006 and Bt95 million in 2007. This loss cut EASY BUY’s capital base. The ratio of total shareholders’ equity to total assets fell from 9.42% in 2005 to 7.16% in 2006 and to 5.70% in 2007, before rising slightly to 5.94% at the end of March 2008. TRIS Rating expects the company to raise a sizable amount of capital to stop further erosion of the equity base or in preparation for expansion. -- End
EASY BUY PLC (EASY BUY)
Company Rating: Affirmed at BBB
Issue Ratings:
EB092A: Bt2,784 million guaranteed debentures due 2009 Affirmed at AA
EB092B: Bt216 million guaranteed debentures due 2009 Affirmed at AA
EB108A: Bt320 million guaranteed debentures due 2010 Affirmed at AA
EB108B: Bt100 million guaranteed debentures due 2010 Affirmed at AA
EB128A: Bt125 million guaranteed debentures due 2012 Affirmed at AA
EB128B: Bt2,710 million guaranteed debentures due 2012 Affirmed at AA
Rating Outlook: Stable
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Copyright 2008, 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.
EASY BUY’s “stable” outlook reflects TRIS Rating’s expectation that the company can deliver the financial performance expected and can sustain its position in the non-bank consumer finance business due to its track record, good brand recognition, and strong support from its major shareholders. The company’s acceptable risk management systems are expected to help mitigate future downside risk from adverse changes in the business environment.
The “stable” outlook for EASY BUY’s guaranteed debentures reflects TRIS Rating’s expectation that ACOM will be able to sustain its solid position in the non-bank consumer finance market despite the unfavorable regulatory controls and limited market opportunities in the Japanese consumer finance industry. The outlook also reflects ACOM’s ability to improve its financial performance after implementing a new business model. The new model brings more diverse sources of income and efficient cost management to compensate for the narrowing interest margin due to a cap on interest rates.
TRIS Rating reported that under the guarantee agreement, which is governed by the laws of Japan, the guarantor irrevocably and unconditionally guarantees to promptly make full payments of obligations of the rated debentures in the event that EASY BUY does not pay. The guarantee’s obligations will be reinstated if the payments made by EASY BUY are recaptured as a result of the issuer filing bankruptcy. Furthermore, if there is any merger or consolidation of ACOM, the successor of ACOM shall assume these guaranteed obligations. If the guarantor fails to pay the amount due after receiving notice, the debentureholders’ representative can commence legal action against the guarantor in the commercial court, in Japan, for the defaulted amount. The obligations of the guarantor under this guarantee agreement rank equally with other unsecured and unsubordinated debts of the guarantor.
As of March 2008, EASY BUY’s loan receivables made up 5% of ACOM’s consolidated receivables, up continuously from 3% at the end of FY2004 (ending March 2004). The amount of EASY BUY’s liabilities guaranteed by ACOM totalled 61,897 million yen as of March 2008, representing 13% of ACOM’s total shareholders’ equity, up from only 1% in FY2004. EASY BUY is ACOM’s first overseas subsidiary in Southeast Asia, and figures significantly in ACOM’s strategy to be a major regional player in the consumer finance industry. ACOM has shown a strong commitment to EASY BUY, providing financial and business support by passing along technology and business practices know-how, as well as developing new products for the Thai market.
TRIS Rating said, the experience of over ten years in the non-bank consumer finance industry has provided EASY BUY with a sufficient track record and good brand recognition. However, strong financial and business support from the parent company is crucial for EASY BUY’s future market position and to sustain growth. Though the nature of its business, providing small loans per customer to a large number of customers, helps diversify risk, the company is still subject to regulatory risk.
Asset quality is a crucial factor of EASY BUY’s credit profile as the company has been pressured by its low capitalization and changing business factors. EASY BUY has adopted many of ACOM’s business operation and risk management tools, including a modern credit-scoring model and effective vendor and information management systems, plus ACOM’s loan collection methods and standards to ensure asset quality control. However, EASY BUY had high provisioning costs (bad debts and doubtful accounts) during 2005-2007 due to high NPLs in the motorcycle hire-purchase business. NPLs were also high during a controversial period when a new interest rate cap was implemented. As a result, EASY BUY reported a loss of Bt113 million in 2006 and Bt95 million in 2007. This loss cut EASY BUY’s capital base. The ratio of total shareholders’ equity to total assets fell from 9.42% in 2005 to 7.16% in 2006 and to 5.70% in 2007, before rising slightly to 5.94% at the end of March 2008. TRIS Rating expects the company to raise a sizable amount of capital to stop further erosion of the equity base or in preparation for expansion. -- End
EASY BUY PLC (EASY BUY)
Company Rating: Affirmed at BBB
Issue Ratings:
EB092A: Bt2,784 million guaranteed debentures due 2009 Affirmed at AA
EB092B: Bt216 million guaranteed debentures due 2009 Affirmed at AA
EB108A: Bt320 million guaranteed debentures due 2010 Affirmed at AA
EB108B: Bt100 million guaranteed debentures due 2010 Affirmed at AA
EB128A: Bt125 million guaranteed debentures due 2012 Affirmed at AA
EB128B: Bt2,710 million guaranteed debentures due 2012 Affirmed at AA
Rating Outlook: Stable
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Copyright 2008, 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.