TRIS Rating Co., Ltd. has affirmed the company rating of Bangkok Expressway PLC (BECL) at “A” and has affirmed the issue ratings at “A-” with “stable” outlook. The ratings reflect the proven traffic volume on its expressways, stable cash flow, the benefit of being the only toll road system linked to the First Stage Expressway System (FES), and a strong management track record. The ratings also take into consideration current debt profile, which is structured to service the debt with operating cash flows until the debt matures. These strengths are partially offset by high leverage, uncertainty over future government transportation policies, and the government’s potential intervention in toll rate adjustments.
The “stable” outlook reflects the expectation that the volume of traffic on the expressways will remain strong, which will in turn produce sufficient debt service coverage from annual revenue. TRIS Rating also expects BECL to maintain the toll roads in good condition which will sustain traffic flows.
TRIS Rating reported that BECL built and operates the elevated Si Rat Expressway (the Second Stage Expressway System or the SES) and various extensions under 30-year Build-Transfer-Operate (BTO) concessions from the Expressway Authority of Thailand (EXAT). The SES was constructed as a six-lane elevated expressway with a total length of 38.5 kilometers (km.). The SES comprises four sectors linked to the FES, which was constructed and is operated by the EXAT. The roads form a city ring road, with routes to the north, east, southeast and southwest, creating a comprehensive road network for Bangkok residents. The network 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 construct and manage 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 EXAT. BECL currently holds 53.33% of NECL’s registered capital.
BECL’s financial performance depends on expressway traffic volumes, toll rates, and operating costs. Though traffic volume on the expressways has continuously increased during the past few years, it started to decline in 2008. The drop was due to the opening of the toll-free Southern Kanchanapisek Outer Bangkok Ring Road (SOBRR), skyrocketing fuel prices in the first nine months of 2008, an economic slowdown, and the effect of a toll rates adjustment. After the toll adjustment, traffic volume dropped for a few months and then recovered. In 2008, average traffic volume dropped by 6.09% to 924,701 vehicles per day from 984,616 vehicles per day in 2007. However, toll revenue decreased by only 4.03% mainly because of toll rises for FES and SES in September 2008 and Sector C+ in November 2008. For the first two months of 2009, average revenue per day was Bt20.72 million, up from Bt19.14 million in the same period of the prior year despite a decline in traffic volume of 14,578 vehicles per day. However, TRIS Rating expects that in the medium term, traffic volume on the expressways will continue to grow based on the growth of the Thai economy, the expansion of residential housing into the areas surrounding the city, and heavy traffic congestion on free roads. BECL's operating performance is expected to remain sound due to stable traffic flow, toll rate adjustments, and the management team’s ability to effectively manage operating costs.
BECL reported toll revenue of Bt6,956 million in 2008, down by Bt282 million or 3.90% from the previous year. Operating profit margin declined to 83.81%, compared with 86.32% in 2007. Though cash flow slightly dropped due to a decline in traffic volume, capital structure and cash flow protection improved as a result of loan repayments and lower financing costs. As of December 2008, total debt was Bt25,575 million, down by Bt1,025 million from Bt26,600 million at the end of 2007. Interest expenses fell from Bt1,359 million in 2007 to Bt1,265 million in 2008. The decline was a result of loan repayments and a reduction in financing costs due to the issuance of a total of Bt11,500 million in senior debentures in August 2007 and November 2008. As a result, both the total debt to capitalization ratio and the earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio strengthened from 62.39% and 3.98 times in 2007 to 61.33% and 4.53 times in 2008.
TRIS Rating said, despite a high leverage, BECL’s liquidity position is strong, supported by fairly stable cash flow resulting from stable traffic volume, predictable financial obligations, and strong support from financial institutions. -- End
Company Rating: Affirmed at A Issue Ratings: BECL108A: Bt3,905 million senior debentures due 2010 Affirmed at A- BECL11NA: Bt2,900 million senior debentures due 2011 Affirmed at A- BECL128A: Bt1,895 million senior debentures due 2012 Affirmed at A- BECL13NA: Bt1,100 million senior debentures due 2013 Affirmed at A- BECL148A: Bt1,700 million senior debentures due 2014 Affirmed at A- Rating Outlook: Stable
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