TRIS Rating Co., Ltd. has affirmed the company rating of Bangkok Expressway PLC (BECL) at “A” and has upgraded the ratings of BECL’s current senior debentures to “A” from “A-”. The outlook is “stable”. The upgrades for the ratings of the debentures are based on the proportion of secured debts, which were lowered to a level that does not threaten the claims of the debenture holders compared with secured creditors. BECL’s 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. 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 BECL’s operational performance will be satisfactory for the remaining lives of the concessions. In addition, dividend payments and future investments are expected to be carefully managed so that they will not harm the company’s financial profile.
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 awarded by the Expressway Authority of Thailand (EXAT). 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 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 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 km under a 30-year BTO concession with the EXAT. BECL currently holds 53.33% of the registered capital in NECL.
TRIS Rating said, BECL’s financial performance depends on expressway traffic volumes, toll rates, and operating costs. Although 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 rate adjustment. In 2009, traffic volume increased by 3.01% to an average of 952,528 vehicles per day, compared with an average of 924,672 vehicles per day in 2008. The recovery mostly happened in the second half of the year. Traffic volume on Sector C increased to the highest level since the opening, reaching 145,631 vehicles per day. The rise was mainly due to the relocation of government agencies to the Bangkok Metropolitan Government Office Center on Chaeng Watthana road which opened at the end of 2008, and the relocation of all undergrad classes of the Thammasat University to Prathum Thani province. Traffic volume on the FES and Sector D, which were affected by the opening of the toll fee SOBRR, recovered slightly after EXAT started collecting toll fee on the SOBRR in March 2009. Sector D was also hit by the drops in business and tourism-related travel in the first eight months of 2009. Management expects that traffic volume on the FES and Sector D will improve further if EXAT increases the toll fees on SOBRR.
TRIS Rating expects that in the medium term, traffic volume on the expressways will continue to grow based on 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. Performance will remain sound despite the revenue sharing formula on the urban network (FES and Sector A&B) will drop from 50% to 40% in March 2011.
BECL’s financial metrics in 2009 improved in all categories compared with 2008. Toll revenue increased by 9.59% year-on-year to Bt7,623 million. Funds from operations (FFO) increased to Bt4,685 million, up 18% or Bt700 million from the previous year, supported by an increase in traffic volume, higher toll rates and lower financing costs. The operating margin was unchanged at 83.6%. Both the capital structure and cash flow protection were stronger. The total debt to capitalization ratio improved to 57.29% from 61.33% in 2008. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio was strengthened to 5.71 times, up from 4.53 times in 2008. The FFO to total debt ratio was strengthened to 19.86%. Despite high leverage, the company’s cash flow protection and flexibility are strong, supported by fairly stable cash flow resulting from stable traffic volume, predictable financial obligations, and long-term relationship with financial institutions. -- End
Company Rating: Affirmed at A Issue Ratings: BECL108A: Bt3,905 million senior debentures due 2010 Upgraded to A from A- BECL11NA: Bt2,900 million senior debentures due 2011 Upgraded to A from A- BECL128A: Bt1,895 million senior debentures due 2012 Upgraded to A from A- BECL139A: Bt1,000 million senior debentures due 2013 Upgraded to A from A- BECL13NA: Bt1,100 million senior debentures due 2013 Upgraded to A from A- BECL148A: Bt1,700 million senior debentures due 2014 Upgraded to A from A- Rating Outlook: Stable
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