Fitch Comments on SVI’s Management Buyout
Bangkok--5 Jun--Fitch Ratings
Fitch Ratings (Thailand) Limited has today said that SVI Public Company Limited’s (SVI) recent management buyout, tender offer plan and proposed financing structure are unlikely to have an immediate impact on its ratings. However Fitch will await the completion of the tender offer and a more complete updated review of the company’s business and financial profile before taking any formal rating action. Fitch has a National Long-term rating of ‘BBB+(tha)’ and National Short-term rating of ‘F2(tha)’ on SVI. The Outlook is Stable.
On 22 May 2009, MFG Solution Company Limited (MFG, wholly-owned by the CEO of SVI) purchased a 58.48% stake in SVI from H&Q Asia Pacific, thereby becoming its major shareholder with a 69.45% stake. In accordance with Thailand’s Securities and Exchange Commission regulations, MFG is required to make a tender offer to buy the remaining shares in SVI from the public. Accordingly, MFG announced a proposed financing structure and tender offer plan on 1 June 2009, under which SVI’s minority shareholders will have until 13 July 2009 to exercise their dissenting rights at THB1.40 per share. MFG intends to finance this transaction using a THB1.8bn credit line from Kasikornbank Public Company Limited (Kasikornbank).
MFG has indicated it will mainly use dividends from SVI to repay Kasikornbank, which is likely to result in an increase in SVI’s net debt and financial leverage. Based on the proposed buyout arrangement, Fitch only expects a limited impact on SVI’s credit protection metrics, thanks to the company’s solid financial profile including a net cash position, and the current share price being above the tender price of THB1.40.
However, SVI’s ratings could come under pressure if a large number of minority shareholders dissent, and if the total amount of funding required to complete the deal results in its adjusted net debt to EBITDAR leverage ratio exceeding 1.0x on a sustained basis.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign 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.
Contacts: Obboon Thirachit, Pimrumpai Punyarachun, Vincent Milton, Bangkok, +662 655 4755; Matt Jamieson, Seoul, +82 2 3278 8355.
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