Thailand Financial News

TRIS Rating Co., Ltd. has affirmed the company rating of Advance Agro PLC (AA) at “BBB” with “stable” outlook.  The rating reflects AA’s strong position as the leading short-fiber pulp and printing & writing paper (P&W paper) producer in Thailand and its fully integrated and efficient plant.  The rating also takes into consideration the increasing demand for pulp and paper in both the domestic and export markets.

However, these strengths are partially offset by the company’s relatively high financial leverage, inherent price volatility in the pulp and paper industry, and increasing production costs.         Another factor is the company’s technical default status on the 13% Guaranteed Notes, which are due in 2007 though the possibility that the noteholders will accelerate the payment is quite low.  The current shareholder structure of AA after Thai Asset Management Corporation (TAMC) sold the 18.9% shareholding of the Damnernchanvanich family, pursuant to the enforcement of a pledge on the shares of AA, to foreign investors is also a concern.  This sale may constitute a Change of Control Triggering Event under the terms of the 11% senior notes due in 2012, if any third party gains control of more than 35% of the company’s shares, which could have a negative impact on credit profile of the company.
The “stable” outlook reflects that the favorable export markets and increasing acceptance of AA’s “Double A” brand in both the domestic and export markets should help stabilize operating performance in the short- to medium-term.  In addition, the company is expected to defer plans to invest in a new paper mill until its financial position strengthens. Advance Agro PLC (AA)
Company Rating:      Affirmed at BBB