/raid1/www/Hosts/bankrupt/TCRAP_Public/120217.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Friday, February 17, 2012, Vol. 15, No. 35
Headlines
A U S T R A L I A
GPAC 2008-AN1: S&P Removes 'B' Rating on Class F Notes Off Watch
OMFINANCIAL LTD: S&P Withdraws 'BB+' Counterparty Credit Rating
SAPPHIRE III: S&P Affirms Rating on Class CA Notes at 'CC'
SAPPHIRE IV: S&P Affirms Rating on Class CA Notes at 'CC'
H O N G K O N G
MATREX HK: Court to Hear Wind-Up Petition on March 21
MORE HEALTH: Wong and Arab Appointed as Liquidators
PARK LINK: Court Enters Wind-Up Order
SUN RISING: Court Enters Wind-Up Order
SUPER STEP: Court Enters Wind-Up Order
TAT SHING: Court to Hear Wind-Up Petition on March 21
TOPLY HOLDINGS: Court Enters Wind-Up Order
I N D I A
AIRTEX PVT: Fitch Places Rating on INR0.8 Mil. Facilities at 'B'
I N D O N E S I A
LISTRINDO CAPITAL: Moody's Gives Ba2 Rating to Sr Unsecured Notes
POWER BERSAMA: Fitch Affirms Issuer Default Rating at 'BB'
K O R E A
HYNIX SEMICONDUCTOR: Moody's Raises Corp. Family Rating to 'Ba3'
HYNIX SEMICONDUCTOR: S&P Keeps Corporate Credit Rating at 'BB-'
HYNIX SEMICONDUCTOR: S&P Raises Corporate Credit Rating to 'BB-'
SK TELECOM: Moody's Lowers Issuer Rating to A3 From A2
- - - - -
=================
A U S T R A L I A
=================
GPAC 2008-AN1: S&P Removes 'B' Rating on Class F Notes Off Watch
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its rating on one class
of notes issued by GPAC Series 2008-AN1 Trust. "At the same time,
we removed five classes of notes from CreditWatch with negative
implications, where they were placed on Sept. 14, 2011, following
our update to the New Zealand residential mortgage-backed
securities (RMBS) criteria. The notes are backed by a portfolio
of subprime and nonconforming residential loans originated by
GMAC-RFC Australia Pty Ltd.," S&P said
"The rating actions are based on further cash flow analysis we
conducted after the CreditWatch placements. We believe the credit
enhancement available and cash flow from the underlying loan
portfolios can withstand stress scenarios commensurate with the
ratings on each of the notes," S&P said.
"At the review date the level of unreimbursed charge-offs to the
unrated notes totaled just over A$7 million. Further, arrears
levels have consistently tracked above the subprime SPIN.
However, as the transaction continues to pay on a sequential
basis, the rated notes would benefit from the build up of
additional credit support," S&P said.
"Given a large proportion of the portfolio has been repaid, the
remaining portfolio has become concentrated, with the largest 10
borrowers comprising 22% of the total pool balance. As a result,
we expect that the performance deterioration of a few loans could
have a more pronounced impact on arrears and prepayment levels in
percentage terms. We believe that the lower-ranking notes are
sensitive to a slow prepayment rate due to the heightened tail-
end risk for the transaction as the portfolio continues to
amortize. However, in our opinion, the high subordination levels
provide a strong buffer to withstand any losses at the tail end
of this transaction," S&P said.
Standard & Poor's 17g-7 Disclosure Report
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the Represent ations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
Rating Actions
Class Rating To Rating From
B AAA (sf) AA/Watch Neg (sf)
C A (sf) A/Watch Neg (sf)
D BBB (sf) BBB/Watch Neg (sf)
E BB (sf) BB (sf)/Watch Neg
F B (sf) B (sf)/Watch Neg
OMFINANCIAL LTD: S&P Withdraws 'BB+' Counterparty Credit Rating
---------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB+/Stable'
long-term counterparty credit rating and outlook on OMFinancial
Ltd. and subsequently withdrawn the rating at the request of the
issuer.
SAPPHIRE III: S&P Affirms Rating on Class CA Notes at 'CC'
---------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on two
classes of notes issued by Sapphire III NZ Series 2006-1. "At the
same time, we affirmed the ratings on four classes of notes and
removed three from CreditWatch with positive implications, where
they were placed on Sept. 14, 2011, following our update to the
New Zealand residential mortgage-backed securities (RMBS)
criteria. The notes are backed by a portfolio of subprime and
nonconforming residential loans originated by Bluestone Mortgages
NZ Ltd.," S&P said.
"The rating actions are based on further cash flow analysis we
conducted after the CreditWatch placements. We believe the credit
enhancement available and cash flow from the underlying loan
portfolios can withstand stress scenarios commensurate with the
ratings on each of the notes," S&P said.
"The rated notes have benefited from a strong build up in the
percentage of credit support provided since close. Further, there
has been an improvement in delinquency levels to 12% (as of Sept.
30, 2011) from the peak of 30% experienced in early 2009, and
there are currently no outstanding charge-offs to the notes. As
of the last payment date, the transaction reverted to pro-rata
pay due to the step-down tests having been met. Although the
build up
of credit support under pro rata would not be as substantial as
if the transaction were sequential pay, the transaction would
revert to sequential if the performance of the portfolio were to
deteriorate (in that the transaction did not continue to meet the
step-down tests)," S&P said.
"Given a large proportion of the portfolio has been repaid, the
remaining portfolio has become concentrated, with the largest 10
borrowers comprising 14% of the total pool balance. As a result,
we expect that the performance deterioration of a few loans can
have a more pronounced impact on arrears and prepayment levels in
percentage terms. We believe that the lower ranking notes are
sensitive to a slow prepayment rate, due to the heightened tail-
end risk for the transaction as the portfolio continues to
amortize. However, in our opinion, the high subordination levels
provide a strong buffer to withstand any losses at the tail end
of this transaction," S&P said.
Standard & Poor's 17g-7 Disclosure Report
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the Represent ations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
Rating Actions
Sapphire III NZ Series 2006-1
Class Rating To Rating From
A AAA (sf) AAA (sf)
MA AAA (sf) AAA (sf)
MZ AA (sf) A+ (sf)/Watch Pos
BA BBB+ (sf) BBB (sf)/Watch Pos
BZ BB (sf) BB (sf)/Watch Pos
CA B (sf) B (sf)
SAPPHIRE IV: S&P Affirms Rating on Class CA Notes at 'CC'
---------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on seven
classes of notes issued by Sapphire IV NZ Series 2007-1 and
removed three of these classes from CreditWatch with negative
implications, where they were placed on Sept. 14, 2011, following
its update to the New Zealand residential mortgage-backed
securities (RMBS) criteria. The notes are backed by a portfolio
of subprime and nonconforming residential loans originated by
Bluestone Mortgages NZ Ltd.
"The rating actions are based on further cash flow analysis we
conducted after the CreditWatch placements. We believe the credit
enhancement available and cash flow from the underlying loan
portfolios can withstand stress scenarios commensurate with the
ratings on each of the notes," S&P said.
"The rated notes have benefited from a build up in the percentage
of credit support provided since close. Although there has been
an improvement in delinquency levels to 8.5% (as of Sept. 30,
2011) from the peak of 29% in early 2009, there continues to be a
significant amount of unreimbursed charge offs outstanding. As of
the January payment date, the class CZ note (unrated) was
completely charged off and there was approximately A$3.1 million
of charge-offs outstanding on the class CA note (currently rated
'CC [sf]')," S&P said.
"Given a large proportion of the portfolio has been repaid, the
remaining portfolio has become concentrated, with the largest 10
borrowers comprising 15% of the total pool balance. As a result,
we expect that the performance deterioration of a few loans can
have a more pronounced impact on arrears and prepayment levels in
percentage terms. We believe that the lower ranking notes are
sensitive to a slow prepayment rate, due to the heightened tail-
end risk for the transaction as the portfolio continues to
amortize. However, in our opinion, the high subordination levels
provide a strong buffer to withstand any losses at the tail end
of this transaction," S&P said.
Standard & Poor's 17g-7 Disclosure Report
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the Represent ations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
Rating Actions
Sapphire IV NZ Series 2007-1
Class Rating To Rating From
AA AAA (sf) AAA (sf)
AZ AAA (sf) AAA (sf)
MA A (sf) A (sf)/Watch Neg
MZ BB (sf) BB (sf)/Watch Neg
BA B (sf) B (sf)/Watch Neg
BZ CCC (sf) CCC (sf)
CA CC (sf) CC (sf)
================
H O N G K O N G
================
MATREX HK: Court to Hear Wind-Up Petition on March 21
-----------------------------------------------------
A petition to wind up the operations of Matrex Hong Kong Limited
will be heard before the High Court of Hong Kong on March 21,
2012, at 9:30 a.m.
MTX Australia Pty Limited filed the petition against the company
on Jan. 17, 2012.
The Petitioner's solicitors are:
Hogan Lovells
11/F, One Pacific Place
88 Queensway, Hong Kong
MORE HEALTH: Wong and Arab Appointed as Liquidators
---------------------------------------------------
Wong Tak Man Stephen and Osman Mohammed Arab on Jan. 30, 2012,
were appointed as liquidators of More Health Limited.
The liquidators may be reached at:
Wong Tak Man Stephen
Osman Mohammed Arab
29th Floor, Caroline Centre
Lee Gardens Two
28 Yun Ping Road
Hong Kong
PARK LINK: Court Enters Wind-Up Order
-------------------------------------
The High Court of Hong Kong entered an order on Jan. 4, 2012, to
wind up the operations of Park Link Industrial Limited.
The company's liquidator is Lau Siu Hung.
SUN RISING: Court Enters Wind-Up Order
--------------------------------------
The High Court of Hong Kong entered an order on Dec. 12, 2011, to
wind up the operations of Sun Rising Development (Agriculture)
Limited.
The company's liquidator is Lau Siu Hung.
SUPER STEP: Court Enters Wind-Up Order
--------------------------------------
The High Court of Hong Kong entered an order on Jan. 3, 2012, to
wind up the operations of Super Step Development Limited.
The company's liquidator is Lau Siu Hung.
TAT SHING: Court to Hear Wind-Up Petition on March 21
-----------------------------------------------------
A petition to wind up the operations of Tat Shing (Hong Kong)
Clothing Limited will be heard before the High Court of Hong Kong
on March 21, 2012, at 9:30 a.m.
Bank of China (Hong Kong) Limited filed the petition against the
company on Jan. 18, 2012.
The Petitioner's solicitors are:
Chow, Griffiths & Chan
6th Floor, South China Building
No. 1 Wyndham Street
Central, Hong Kong
TOPLY HOLDINGS: Court Enters Wind-Up Order
------------------------------------------
The High Court of Hong Kong entered an order on Dec. 6, 2011, to
wind up the operations of Toply Holdings Limited.
The company's liquidator is Lau Siu Hung.
=========
I N D I A
=========
AIRTEX PVT: Fitch Places Rating on INR0.8 Mil. Facilities at 'B'
----------------------------------------------------------------
Fitch Ratings has assigned India's Airtex (I) Pvt. Ltd. a
National Long-Term rating of 'Fitch B(ind)'. The Outlook is
Stable. Airtex's INR54 million fund-based working capital limit
and INR0.8 million non fund-based facilities have also been
assigned 'Fitch B(ind)'/'Fitch A4(ind)' ratings.
The ratings reflect Airtex's small size of operations, high
working capital intensity, and the commoditized nature of its
product. In the financial year ended March 2011 (FY11), the
company reported revenue of INR230.57 million and an EBITDA
margin of 7.2%.
The ratings also factor in the company's presence in a highly
fragmented and competitive industry, its inability to pass on
high raw material costs to customers, and its five-year track
record of moderate to high net financial leverage (total adjusted
debt/ operating EBITDA: 4.5x in FY11, 4.6x in FY10). Fitch
expects leverage to increase in FY12 on account of its INR100m
debt-led capex plan. .
Negative rating action may result from a sustained fall in
operating profitability and an increase in the working capital
requirements and debt led expenditure leading to net financial
leverage exceeding 6x. Positive rating action may result from
consistent revenue growth coupled with stable EBITDA margins
which could improve the net financial leverage position below
3.5x.
Incorporated in 2006, Airtex manufactures polyester-cotton
synthetic cloth for trousers.
=================
I N D O N E S I A
=================
LISTRINDO CAPITAL: Moody's Gives Ba2 Rating to Sr Unsecured Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned a definitive Ba2 senior
unsecured bond rating to the US$500 million, 6.95%, 7-year notes
issued by Listrindo Capital B.V.
The notes are unconditionally and irrevocably guaranteed by PT
Cikarang Listrodo.
Moody's has also affirmed Cikarang's Ba2 corporate family rating
and existing senior unsecured notes rating.
The ratings outlook is negative.
Ratings Rationale
The definitive rating on this debt obligation confirms the
provisional bond rating assigned on 30 January 2012 based on the
fact that the amount raised from the bond issue and the covenants
stated in the Offering Memorandum Circular dated 13 February 2012
are consistent with Moody's expectations.
About US$310 million of the new issue will be used to repurchase
the tendered 2015 notes and pay the consenting holders. The
balance of US$190 million will be used to pay the expenses
related to the offering and the remaining amount has been
earmarked for capital expenditure and general corporate purposes.
The principal methodology used in rating Cikarang was the Power
Generation Projects published in December 2008.
PT Cikarang Listrindo is the sole IPP supplier of electricity to
a wide range of mostly foreign-owned companies in five industrial
estates in the Cikarang area outside of Jakarta. It owns and
operates a 646MW natural gas-fired combined cycle power station,
and distributes directly to companies on the industrial estates.
Its capacity expansion plan, upon completion, will increase
installed generation capacity to 755MW by mid-2012 and 1035MW by
end- 2016. It also has an offtake agreement for part of its power
with PT Perusahaan Listrik Negara (PLN, Baa3/stable). Cikarang is
owned by three Indonesian families.
POWER BERSAMA: Fitch Affirms Issuer Default Rating at 'BB'
----------------------------------------------------------
Fitch Ratings has affirmed Indonesia-based PT Tower Bersama
Infrastructure Tbk's (TBI) Long-Term Local- and Foreign-Currency
Issuer Default Ratings at 'BB' respectively. The Outlook is
Stable.
The affirmation follows an agreement signed on 8 February 2012
between TBI and PT Indosat Tbk (Indosat; 'BBB-'/Positive) for the
purchase and leaseback of 2,500 telecom towers for an upfront
consideration of USD406m comprising cash of USD342m-USD350m and
equity. On completion of the deal, TBI will issue new equity to
Indosat equal to 5% of the enlarged company. Also under the
agreement, for the next 10 years Indosat will benefit from an
earn-out mechanism with a total potential payment of up to
USD113m.
TBI will fund the acquisition with debt and Fitch expects this to
weaken adjusted net debt/operating EBITDAR to above 5x for 2012
from below 3.5x in 2011. However, free cash flow should enable
TBI to deleverage below 4x by 2013. Nevertheless, the
transaction has reduced the company's rating headroom for further
acquisitions and Fitch is likely to take negative rating action
should adjusted net debt/operating EBITDAR remain above 4.0x on a
sustained basis. In this regard Fitch takes comfort from
management's leverage guidance of 3.5-4.0x and willingness to use
equity to fund further transactions should leverage rise above
this level on a sustained basis.
Following the transaction TBI will have 7,368 sites and more than
10,000 tenancies (year-end 2011: 4,868 sites and 7,002
tenancies). Indonesia's four largest telcos will contribute more
than 70% of TBI's total revenue and Indosat will account for more
than 25% of revenue following the deal. After the acquisition,
the company's average contract length will be 7.7 years,
representing USD1.5bn of locked-in revenue.
The transaction is subject to the approval of TBI's shareholders
and Indosat's bondholders and lenders.
=========
K O R E A
=========
HYNIX SEMICONDUCTOR: Moody's Raises Corp. Family Rating to 'Ba3'
----------------------------------------------------------------
Moody's Investors Service has upgraded the corporate family and
senior unsecured debt ratings of Hynix Semiconductor to Ba3 from
B1, after SK Telecom Co. Ltd. (SKT, A3/Negative) completed its
acquisition of a 21.05% in the company on February 14. The
rating outlook is positive.
Ratings Rationale
This action concludes Moody's review for upgrade initiated on 15
November 2011.
"The upgrade reflects Moody's view that Hynix will be an
important investment for SK Telecom and a growth engine in the
integrated circuit technology category", says Annalisa DiChiara,
a Moody's Vice President and Senior Analyst.
Moody's also expects that SKT will take an active role in
supporting Hynix's business strategy, particularly in light of
its board representation and the proposed renaming of the company
to "SK-Hynix."
Consequently, Moody's now rates Hynix one notch above its
standalone B1 rating on the expectation that SKT has the ability,
and will be willing, to render financial support to the company
in case of need. SKT has a proven track record of providing
support to core assets like SK Broadband.
"The positive outlook recognizes the improvement in the company's
financial positions with adjusted debt/EBITDA below 2x and
Debt/Capital in the 45% range, which strongly positions it at the
B1 rating level with upwards ratings momentum," she adds .
Furthermore, while the challenging industry environment is likely
to persist through the first half of 2012, Moody's expects Hynix
to benefit from the more subdued supply in the dynamic random
access memory ("DRAM") segment and continued strong growth in
NAND flash memory. As such, Moody's expects an improvement in
Hynix's operating performance in fiscal 2012.
The new share issuance, which raised KRW2.3 trillion new capital,
is also positive for Hynix's credit profile as it provides
additional financial flexibility.
Moody's will also continue to monitor the situation with regards
to any reinforcement of business synergies that arrive from the
acquisition by SKT.
Further positive ratings action could arise if Hynix's adjusted
Debt/Capital is sustained below 45%, EBIT/interest rises into the
2.25-2.50x range and the company generates positive free cash
flow.
Downward rating pressure is limited given the positive outlook.
The outlook could revert to stable if Hynix pursues more
aggressive debt-funded expansion or the semi-conductor industry
deteriorates worse than expected such that adjusted Debt/Capital
increases into the 50-55% range, EBIT/Interest contracts into the
1.5-2.0x range while operating margins contract materially.
In addition, an adverse change in the relationship between Hynix
and SKT could result in a negative rating action.
The principal methodology used in rating Hynix Semiconductor,
Inc. was the Global Semiconductor Industry Methodology published
in November 2009.
Hynix Semiconductor Inc, a Korea-based company, is engaged in the
design, manufacture, and sale of memory chips.
HYNIX SEMICONDUCTOR: S&P Keeps Corporate Credit Rating at 'BB-'
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term
corporate credit rating and senior unsecured debt ratings on
Korea-based SK Telecom Co. Ltd. (SKT) to 'A-' from 'A', following
its acquisition of a major stake in Hynix Semiconductor Inc.
(Hynix; BB-/Stable/--). "At the same time, we removed all ratings
on SKT from CreditWatch, where we placed them with negative
implications on Nov. 14, 2011. The outlook on the long-term
corporate credit rating is stable," S&P said.
"The downgrade follows SKT's announcement that it had completed
its acquisition of a 21% stake in Hynix for Korean won (KRW) 3.4
trillion. Since SKT largely funded the acquisition with debt, the
deal weakens the company's financial risk profile. Standard &
Poor's estimates SKT's ratio of debt to EBITDA after adjusting
for the proportional consolidation of Hynix will increase to
about 1.7x in 2012 from 1.3x in 2011. When assessing SKT, we
consolidate Hynix on a pro rata basis because the investment is
material to SKT's financial soundness, SKT is Hynix's largest
shareholder, and Hynix is strategically important to SKT's future
growth objectives," S&P said.
"In our view, the highly cyclical character of the semiconductor
industry hurts SKT's strong business risk profile. Although Hynix
maintains a strong position in the global industry for
semiconductor memory, its volatile operating performance and
large capital expenditure requirements could undermine SKT's
stable cash flows. Also, we believe this purchase indicates that
SKT's growth strategy has become more aggressive, and we view
this as negative for our assessment of SKT's corporate
governance," S&P said.
"The stable outlook reflects our expectation that SKT's strong
market position should enable the company to continue to generate
stable cash flows and maintain its strong debt servicing
capability. The stable outlook also reflects our expectation that
SKT will not materially increase its ownership stake or capital
investment in Hynix in the next few years," S&P said.
The rating could come under downward pressure in the event of:
SKT materially increases its ownership stake or level of
capital investment in Hynix or makes other substantial
investments in noncore businesses; or
SKT's debt to EBITDA after the pro rata consolidation of Hynix
exceeds 2.0x as a result of weaker operating performance or
larger-than-expected capital investments.
"Though less likely, we may raise the rating if SKT shows both a
sustainable improvement in its financial risk profile and a more
conservative growth strategy," S&P said.
HYNIX SEMICONDUCTOR: S&P Raises Corporate Credit Rating to 'BB-'
---------------------------------------------------------------
Standard & Poor's Ratings Services raised its long-term corporate
credit rating and senior unsecured debt ratings on Korea-based
Hynix Semiconductor Inc. to 'BB-' from 'B+', following SK Telecom
Co. Ltd.'s (SKT; A-/Stable/--) acquisition of a major stake in
the company. "At the same time, we removed all ratings on Hynix
from CreditWatch, where we placed them with positive implications
on Nov. 14, 2011. The outlook on the long-term corporate credit
rating is stable," S&P said.
"The upgrade follows SKT's announcement that it has completed its
acquisition of a 21% stake in Hynix for Korean won (KRW) 3.4
trillion. Under the deal, Hynix issued SKT 101.85 million new
shares and received KRW2.3 trillion in equity capital. In our
view, this capital increase improves Hynix's capital structure
and financial flexibility. We estimate the company's ratio of
debt to capital will improve to about 37% in 2012 from about 46%
in 2011," S&P said.
"Standard & Poor's expects Hynix to maintain its strong position
in the global industry for semiconductor memory. Although the
company incurred operating losses in the second half of 2011,
mainly due to a sharp decline in DRAM prices and global economic
uncertainties, we expect the company to gradually recover
profitability from the second quarter of 2012 due to relatively
solid performance in its NAND flash memory and mobile DRAM
businesses," S&P said.
"The stable outlook reflects our expectation that Hynix's solid
position in the market will enable it to maintain its operating
performance and measures of its financial performance in the next
one to two years," S&p said.
S&P may raise the ratings on Hynix in the event of:
Hynix and SKT demonstrate a record of business and management
integration or financial support that results in stronger ties
between the companies; or
Hynix significantly improves its market position in its core
business, resulting in the generation of solid free cash flow
on a sustainable
basis.
On the other hand, S&P could lower the ratings in the event of:
"We assess that Hynix's growth strategy has become
significantly more aggressive than we have factored into the
current rating," S&P said.
Key measures of its financial performance deteriorate, such as
debt to EBITDA in excess of 3.0x, likely as a result of an
unexpectedly long downturn in the global memory semiconductor
industry.
SK TELECOM: Moody's Lowers Issuer Rating to A3 From A2
------------------------------------------------------
Moody's Investors Service has downgraded SK Telecom Co., Ltd's
issuer and senior unsecured bond rating to A3 from A2. The
outlook on the ratings is negative.
This concludes Moody's review for possible downgrade initiated on
November 11, 2011.
Ratings Rationale
The rating action follows the completion of SKT's acquisition of
a 21.05% stake in Hynix Semiconductor Co., Ltd (Ba3/positive). Of
the acquisition cost of KRW3.4 trillion, KRW2.5 trillion will be
debt-funded.
"The downgrade reflects an expected weakening in SKT's financial
profile after the payment of the sizable acquisition cost, and
which is from a level that is already marginal at the A2 rating,"
says Laura Acres, a Moody's Vice President and Senior Credit
Officer.
"Furthermore, this transaction raises concerns over the apparent
increased tolerance for risk at SKT, given the quantum of debt
used to fund the acquisition of a highly volatile business with
little synergies with its core businesses," says Acres.
At the same time, Moody's expects SKT is unlikely to provide
financial assistance to Hynix over the next couple of years, as
the latter's capital structure and liquidity will improve
significantly on the back of an equity issuance of KRW2.3
trillion.
Nonetheless, Moody's envisages the emergence of a degree of
contingent liabilities to support Hynix over the medium- and
long-term, given the highly cyclical and capital-intensive
characteristics of the memory chip industry.
The negative outlook reflects concerns over the high financial
leverage after the acquisition as well as the ongoing and
heightened state of competition and regulatory uncertainties in
the Korean telecommunications space. This shows little sign of
abating.
In 2011, SKT reported a decrease in operating profit following a
particularly weak 4Q 2011, and adjusted consolidated debt/EBITDA
remained static at 1.5x despite expectations of improvement,
given the handset installment payment receivables programme with
Hana SK Card.
And, in Moody's view, competition will remain intense as
smartphone penetration deepens and as operators seek to build
their Long-Term Evolution (LTE) subscriber bases. As such, SKT's
ability to reverse ongoing margin erosion and cut capex will be
constrained.
Together these factors result in a financial and operating
profile which remains pressured, as highlighted by projected
consolidated debt/EBITDA of about 2.0x and consolidated EBITDA
margin of about 33% in 2012, barring any asset sales.
At the same time, Moody's takes comfort from SKT's dominant
position in the wireless market with a market share in excess of
50%, positioning it well to determine trends and market
direction. SKT is also expected to retain its sound liquidity
profile, supported by excellent access to the international and
domestic debt markets.
Upward pressure on the rating is unlikely in the near term, given
the negative outlook. However, the outlook could revert to stable
if: 1) Moody's perceives that the operating challenges in Korea's
telecom market become more manageable and that SKT is able to
turn around its consolidated EBITDA margins; 2) SKT achieves de-
leveraging and demonstrates prudence in pursuing
organic/inorganic growth. Such factors may be evidenced by
adjusted consolidated debt/EBITDA below 1.8x, and adjusted EBITDA
margins above 35% on a consistent basis.
The rating could be downgraded should SKT's overall financial
profile deteriorate further because of its aggressive growth
strategy, and/or increased competitive threats. Additional
investments into Hynix on a large scale and/or a material
weakening in Hynix's financial profile would also pressure the
rating. The key credit metrics that Moody's would consider for a
downgrade include adjusted consolidated debt/EBITDA above 2x and
EBITDA margins below 33% on a consistent basis.
The principal methodology used in this rating was Global
Telecommunications Industry published in December 2010.
SKT is the largest mobile telecommunications provider in South
Korea with an estimated 50.5% market share as at December 2011.
Its core business is mobile voice and wireless internet. SKT is
also the controlling shareholder in SK Broadband (rated -
Baa3/positive) -- Korea's second largest fixed line operator.
*********
Tuesday's edition of the TCR-AP delivers a list of indicative
prices for bond issues that reportedly trade well below par.
Prices are obtained by TCR-AP editors from a variety of outside
sources during the prior week we think are reliable. Those
sources may not, however, be complete or accurate. The Tuesday
Bond Pricing table is compiled on the Friday prior to
publication. Prices reported are not intended to reflect actual
trades. Prices for actual trades are probably different. Our
objective is to share information, not make markets in publicly
traded securities. Nothing in the TCR-AP constitutes an offer
or solicitation to buy or sell any security of any kind. It is
likely that some entity affiliated with a TCR-AP editor holds
some position in the issuers' public debt and equity securities
about which we report.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR-AP. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com
Friday's edition of the TCR-AP features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical
cost net of depreciation may understate the true value of a
firm's assets. A company may establish reserves on its balance
sheet for liabilities that may never materialize. The prices at
which equity securities trade in public market are determined by
more than a balance sheet solvency test.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Asia Pacific is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland,
USA. Valerie U. Pascual, Marites O. Claro, Joy A. Agravante,
Rousel Elaine T. Fernandez, Ivy B. Magdadaro, Frauline S.
Abangan, and Peter A. Chapman, Editors.
Copyright 2012. All rights reserved. ISSN: 1520-9482.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding,
electronic re-mailing and photocopying) is strictly prohibited
without prior written permission of the publishers.
Information contained herein is obtained from sources believed
to be reliable, but is not guaranteed.
TCR-AP subscription rate is US$625 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance
thereof are US$25 each. For subscription information, contact
Peter Chapman at 240/629-3300.
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