The “stable” outlook reflects TRIS Rating’s expectation that TSFC will be able to fulfill debt repayment according to the obligations and covenants stated in the DRA and any other covenants likely to be made for the new credit facilities. In addition, the rating outlook also takes into account the expected supports from SET as the largest shareholder. The abilities to recapture the market position in the margin loan business and access to funding from various sources as in the past has yet to be proved.
TRIS Rating reported that TSFC entered the DRA on 20 March 2009, and on 22 July 2009 the company was able to fulfill the DRA’s condition to raise at least Bt1 billion of new capital from existing shareholders, new investors and debt-equity conversion. The new capital of Bt1,016.74 million (par at Bt10 per share) strengthened the company’s BIS ratio to about 30% from 0.92% as of March 2009. After the recapitalization, SET became the largest shareholder, holding 24.66% stake in TSFC, followed by the Ministry of Finance (MOF) (10.56%), Krungthai Bank PLC (6.02%), Government Savings Bank (4.92%), 12 commercial banks (17.72%), 34 securities companies (16.27%), 14 fund management companies (15.57%) and 9 insurance companies (4.28%).
TRIS Rating said, under the DRA, all debtors were ranked pari pasu. Total debt obligations were Bt8,725 million, of which 52.03% were already repaid to the debtors as of 20 April 2009. The remaining portion is scheduled to repay through debt-equity conversion (3.44%) and debt release or haircut (2.87%) under the recapitalization plan, as well as through debt payment on 21 December 2009 (22.92%) and 21 June 2010 (18.74%) The company is expected to secure credit facilities of Bt2,500 million from four banks in the next few weeks. This should help provide sufficient funding to service its debt obligations. However, TSFC has a constrained financial flexibility and weak cash flow, which make the company be exposed to re-financing risk in the future.
After registered the new shares issues at the Ministry of Commerce on 24 July 2009, TSFC is permitted by the Securities and Exchange Commission (SEC) to re-operate the margin loan business. The company announced to commence services on 28 July 2009 (today). The company will face challenges in its core business due to uncertainty in operating environment and market response to the company’s re-entry into the margin loan business. According to the business plan, the company is likely to get permission to operate new businesses (private REPO and stock borrowings and lending--SBL) in the future. However, management team will need time to build-up a track record and achieve a considerable market size as stipulated in the business plan.
As of 24 July 2009, TSFC’s total assets (unaudited and unreviewed) were Bt4,840 million, down from Bt8,705 million at the end of 2008. In 2008, TSFC booked unrealized losses on securities investment of Bt987 million, which significantly reduced shareholders’ equity to Bt62 million as of December 2008 from Bt2,129 million as of December 2007. The shareholders’ equity turned negative of Bt14 million as of March 2009. After the new capital increase, the shareholders’ equity recovered to Bt1,122 million as of 24 July 2009. At the same time, TSFC had Bt2,680 million of gross margin loan receivables and Bt1,662 million of net investment in securities, mostly government bonds and money market funds. -- End
Company Rating: Upgraded to BB from D Rating Outlook: Stable
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