Fitch Affirms Siam Future Development; Rates THB500m Bonds 'BBB(tha)'

Thu Jun 12, 2014 1:27am EDT

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(The following statement was released by the rating agency) BANGKOK/SINGAPORE/SYDNEY, June 12 (Fitch) Fitch Ratings (Thailand) Limited has affirmed Siam Future Development Public Company Limited's (SF) National Long-Term Rating at 'BBB(tha)' with a Stable Outlook, its National Short-Term rating at 'F3(tha)' and its outstanding senior unsecured debentures at 'BBB(tha)'. Fitch has simultaneously assigned SF's new issue of up to THB500m senior unsecured debentures due in 2016 a National Long-Term Rating of 'BBB(tha)'. The proceeds will be used to refinance maturing debentures. The notes are rated at the same level as SF's National Long-Term rating as they represent direct, unconditional, unsecured and unsubordinated obligations of the company. KEY RATING DRIVERS High Financial Leverage: Fitch expects SF's net adjusted debt to EBITDAR to remain high at 5.5x-6.5x during 2014-2015, after the cancellation of its capital raising plan of THB600m-THB1bn in 2H13. The cancellation was due to unfavourable market conditions as well as the subsequent postponement of its investment plan, mainly for joint ventures with the existing and potential partners, resulting in a reduction in projected investment of THB500m-550m in 2014. Improving Recurring Income Growth: SF is likely to post recurring income growth of about 1% in 2014 and about 8% in 2015. SF has successfully recruited new anchor tenants to replace tenants terminating their leases at its major centres i.e. The Esplanade and The Avenue Pattaya in 2014. This should help to compensate for a decrease in revenues in some centres that were affected by the political rallies in 1H14. SF also plans to open four new centres in 2015 (mostly expansion phases) with total gross leasable areas (GLA) of about 26,000 square metres (sq.m). Strong Market Position: SF is a leading developer of Thai medium-sized open-air shopping centres. SF's larger portfolio, greater experience and expertise in this niche gives it an advantage over its peers. SF has a quality and diversified shopping-centre portfolio in terms of location. It was able to maintain an average occupancy of more than 90% since the opening of its first centre in 1995, despite experiencing some tenant issues and low traffic in some major centres in 2012-2013. Fitch expects SF's average occupancy to be at about 95% in 2014-2015 (2013: about 92%). Secured Cash Flow: SF has long-term leases for about 65% of its total gross leasable area (GLA), which contributes around 30%-35% of total recurring income. Its anchor tenants are also high profile and diversified. The space rented to its five largest tenants account for 40% of total GLA, while the largest tenant - occupying 15% of total GLA - is a related company. Mega Bangna, its first mega joint-venture (JV) project, contributed cash flow in the form of dividends since 2013. Dividends from its first full-year of operations - paid in early 2014 - were about 20% of SF's EBITDAR in 2013. Reliance on refinancing: SF's THB540m debt, including THB500m debentures, will mature over the next 12 months. The company plans to refinance the maturing debt with new debentures. SF's liquidity is supported by a cash balance and liquid investments of THB64.4m, and undrawn committed bank facilities of THB867m at end-March 2014. RATING SENSITIVITIES Negative: Future developments that may, individually or collectively, lead to negative rating action include: - Deterioration in recurring income with rental-derived EBITDA to interest expense at below 3.0x on a sustained basis (FY to March 2014: 3.7x) -Financial leverage as measured by adjusted net debt to EBITDAR at above 6.5x on a sustained basis (FY to March 2014: 6.5x) Positive: Future developments that may, individually or collectively, lead to positive rating action include: -Improvement in recurring income with rental-derived EBITDA to interest expense at above 4.5x on a sustained basis -Financial leverage at below 4.5x on a sustained basis Positive rating action is unlikely over the next 12-18 months due to the company's sustained high financial leverage. Contacts: Primary Analyst Somruedee Chaiworarat Director +66 2108 0160 Fitch Ratings (Thailand) Limited Level 17, Park Ventures, 57 Wireless Road, Lumpini, Patumwan, Bangkok 10330 Secondary Analyst Nichaya Seamanontaprinya Associate Director +66 2108 0161 Committee Chairperson Vicky Melbourne Senior Director +612 8256 0325 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(tha)' for National ratings in Thailand. Specific letter grades are not therefore internationally comparable. Additional information is available at www.fitchratings.com. Applicable criteria, 'Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage', dated 28 May 2014, and 'National Scale Ratings Criteria', dated 30 October 2013, are available at www.fitchratings.com. Applicable Criteria and Related Research: Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage here National Scale Ratings Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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