Fitch Ratings Thailand has assigned a national long-term rating of A (tha) with a positive outlook to 35 billion baht in unsecured, unsubordinated debentures from Siam Cement Plc (SCG).
The rating is based on the assumption that SET-listed SCG's revenue will grow by 10% in 2017 with capital expenditure (capex) of 45 billion baht a year during 2017-18.
The debentures of the industrial conglomerate will be issued in two tranches: The first totalling 10 billion baht due in 2024 and the second totalling 25 billion due in 2021, said Fitch.
The proceeds will be used to refinance maturing debentures and fund future capex and investments. The notes are rated at the same level as SCG's national long-term rating because they constitute direct, unsecured, unconditional and unsubordinated obligations of the company.
Fitch expects SCG to maintain its funds from operations (FFO) adjusted net leverage at below 2.8, despite the higher-than-expected investment in the Long Son Petrochemicals (LSP) project.
"The company's operating cash flow generation in the first half of 2017 was in line with our expectations. Its current low FFO adjusted net leverage of 2.0 at end-June 2017 will provide a comfortable cushion for its capex and investment plan of 250-260 billion over the next five years, including the LSP project," said Fitch.
SCG said it will maintain its five-year capex and investment plan.
"In our view, the company is likely to adjust, postpone, or cancel some of its projects as SCG expects the LSP project cost to be 88 billion baht, or 70% of its investment budget over the next five years," Fitch said.
SCG has the flexibility to adjust its investments as most of the plans are uncommitted, such as capacity expansion at existing plants or potential mergers and acquisitions.
But a significant increase in capex and investment beyond Fitch's expectations could have a negative rating impact, the agency said.
SCC shares closed yesterday on the Stock Exchange of Thailand at 490 baht, an increase of six baht, in heavy trade worth 1.11 billion baht.
