TRIS Rating Co., Ltd. has assigned a “A-” rating to the proposed issue of up to Bt1,000 million in senior debentures of Bangkok Expressway PLC (BECL). At the same time, TRIS Rating has affirmed the company rating of BECL at “A” and has affirmed the ratings of BECL’s current senior debentures at “A-”. The rating outlook remains “stable”. The lower ratings of the debentures reflect lower priority claims of the debenture holders compared with the existing secured creditors. BECL’s corporate credit rating reflects 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. 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 proceeds from BECL’s new debentures will be reserved to refinance existing debentures due on August 2010.
The “stable” outlook reflects TRIS Rating’s expectation that the traffic volume 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 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 the 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 with 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+, with a total length of 32 kms under a 30-year BTO concession with the ETA. BECL currently holds 53.33% of the registered capital in NECL.
TRIS Rating said the financial performance of BECL depends on the expressway traffic volume, the toll rate, and operating costs. Traffic volume on the expressways had continuously increased during the past few years. However, it declined in 2008. The drop was due to the opening of the toll-free Southern Outer Bangkok Ring Road (SOBRR), skyrocketing gasoline prices, and an economic slowdown. Nonetheless, once the toll collection on the SOBRR began in March 2009, traffic volume on the FES and Sector D which were directly affected recovered. Traffic flow on Sector C also rose by around 4% due to the opening of the Government Center on Changwattana road. In the first six months of 2009, traffic volume rose to an average of 934,884 cars per day, compared with an average of 933,122 cars per day in the same period of the prior year. TRIS Rating expects that in the medium and long term, traffic volume will increase continuously due to 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. 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.
For the first six months of 2009, BECL’s financial metrics improved in all categories, compared with the same period of the prior year and the full year ending in December 2008. Toll revenue in the first six months of 2009 increased by 9.28% year-on-year to Bt3,710 million. Funds from operations (FFO) increased to Bt2,368 million, compared with Bt1,927 million in the same period of the prior year. The rise was mainly due to toll rate adjustments in September 2008 for FES and SES and in November 2008 for Sector C+. Operating profit margin rose to 86.2%, compared with 83.8% in the first six months of 2008 and the 2008 full results. This was because maintenance expenses in the first half of 2009 were lower as maintenance programs were postponed to the second half of the year. As of June 2009, total debt was Bt23,237 million, down by Bt2,338 million from Bt25,575 million as of December 2008. With higher operating cash flow from toll rate adjustments, lower leverage from amortization of debt, and a reduction in financing costs, both the capital structure and cash flow protection were stronger. The total debt to capitalization ratio improved to 57.9% in June 2009 from 61.33% at the end of 2008. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio were strengthened to 5.75 times in the first half of 2009 up from 4.53 times in 2008. As of June 2009, the FFO to total debt ratio was 10.19% (non-annualized), up from 7.59% in the same period of the prior year. Despite a high leverage, the company’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, said TRIS Rating. -- 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- Up to Bt1,000 million senior debentures due 2013 A- Rating Outlook: Stable
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