/raid1/www/Hosts/bankrupt/TCRAP

/raid1/www/Hosts/bankrupt/TCRAP_Public/130722.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 Monday, July 22, 2013, Vol. 16, No. 143 Headlines A U S T R A L I A BILLABONG INT'L: Debt Holders Threaten to Pull Firm Under BUNNY BITES: Vegetable Growers Call For Ausveg Chair to Resign MP CONSTRUCTIONS: Hall Chadwick Appointed as Administrators PACIFIC HORIZON: Trading Entities Placed in Receivership TRUE NORTH: Clifton Hall Appointed as Liquidators WICKHAM SECURITIES: ASIC Extends Freezing Orders in Collapse * AUSTRALIA: ATO to Chase Companies Practicing "Phoenix" Activity C H I N A SHIMAO PROPERTY: Moody's Changes Outlook on Ba3 CFR to Stable I N D I A COIMBATORE ROLLER: CRISIL Reaffirms 'BB' Rating on INR73MM Loans CORE EDUCATION: Moody's Withdraws B2 CFR and Negative Outlook ELICO LTD: CRISIL Raises Rating on INR94MM Loan to 'B+' PRAJAY PROPERTIES: CRISIL Places 'D' Ratings on INR1.22BB Loans SEASAGA ENTERPRISES: CRISIL Raises Ratings on INR169.5MM Loans SHAFA EDUCATIONAL: CRISIL Reaffirms 'D' Ratings on INR500MM Loans SHAMKO EXIM: CRISIL Rates INR20MM Bill Discounting Loan at 'B' SHRAMAN POLYMERS: CRISIL Rates INR50MM Cash Credit at 'B' V3 MEGACORP: CRISIL Assigns 'B+' Ratings to INR160MM Loans VANTAGE SPINNERS: CRISIL Assigns 'B-' Ratings to INR540MM Loans VARUN FERTILIZERS: CRISIL Reaffirms B+ Ratings on INR117.5MM Loan VEDANT HOSPITAL: CRISIL Assigns 'D' Ratings to INR120MM Loans I N D O N E S I A LIPPO KARAWACI: Fitch Affirms 'BB-' LT Issuer Default Ratings J A P A N EACCESS LTD: Moody's Affirms Ba2 CFR with Stable Outlook JLOC 39: S&P Lowers Ratings on Classes B and C Notes to 'D' SOFTBANK CORP: Moody's Cuts Ratings to Ba1 After Sprint Purchase S O U T H K O R E A STX GROUP: Shipbuilding Unit's Future Remains in Limbo S R I L A N K A NATIONAL SAVINGS: Fitch Assigns 'BB-' Issuer Default Ratings X X X X X X X X * Asia-Pacific Country Ratings to Remain Stable Says Moody's - - - - - ================= A U S T R A L I A ================= BILLABONG INT'L: Debt Holders Threaten to Pull Firm Under --------------------------------------------------------- The Sydney Morning Herald reports that Billabong International Limited's senior debt holders are believed to have threatened to pull the company under unless it signed a deal that would involve a AUD40 million upfront payment. SMH says US hedge funds Oaktree Capital Management and Centerbridge Partners, which bought a portion of Billabong's debt from its senior lenders for a 10 per cent discount in the past month, put their competing proposal to the company on July 17. They submitted another plan on July 18, which was also rejected by Billabong, the report relates. This was after the AUD294 million refinancing deal was signed with Altamont Consortium, SMH notes. According to the report, insiders suggested it was inferior to the Altamont proposal and a plan from another suitor, the former US Billabong executive Paul Naude and the private equity firm Sycamore Partners. "They didn't even chase Billabong up the aisle, they knocked on the honeymoon suite," a Billabong insider said of the Wednesday [July 17] submission. The report said the hedge funds were thought to have pressed Billabong to accept their offer or face the possibility of being cut off from accessing debt. According to the report, Billabong chairman Ian Pollard said Oaktree and Centerbridge's proposal had a "high level of conditionality" that the firm could not entertain. "We had no piece of paper that had any numbers on it, let alone a proposal," SMH quotes Mr. Pollard as saying about the hedge funds' earlier advances. SMH relates that Mr. Pollard said he would talk to Billabong's lawyers about what responsibilities the board had to its shareholders if the pair were to submit another plan. Billabong said late Thursday the second proposal was "not an offer that is capable of acceptance," the report adds. The Sydney Morning Herald reported in April that the company's path to redemption got tougher after the surfwear group downgraded earnings guidance and said a AUD537 million loss for the half-year put it in breach of debt covenants. The breach led its banks to seek a secured charge over most of the business, SMH related. Billabong, according to the report, has fallen on difficult times because of changing consumer tastes and the financial crisis. It has closed stores and sold assets as part of an effort to restructure the company. Based in Australia, Billabong International Limited (ASX:BBG) -- http://www.billabongbiz.com/-- is engaged in the wholesaling and retailing of surf, skate, snow and sports apparel, accessories and hardware, and the licensing of its trademarks to specified regions of the world. BUNNY BITES: Vegetable Growers Call For Ausveg Chair to Resign -------------------------------------------------------------- ABC Rural reports that vegetable growers are calling on the chairman of the industry's peak body, Ausveg, to step down after Bunny Bites, a company he co-owned, went bust. ABC Rural relates that creditors of Bunny Bites voted on July 15 to put the company into liquidation after it went into administration last month owing nearly AUD10 million. The report says the administrator has advised creditors that they may be able to make a claim against the company directors Peter and John Brent for insolvent trading. According to the report, Chairman of Onions Australia, Andrew Moon, said growers feel Ausveg is unable to represent their interests while John Brent remains on the organisation's board. "As leaders in the industry, we need to be very mindful of the fact that we do represent growers and that growers do have feelings," the report quotes Mr. Moon as saying. "Certainly this one needs to be addressed . . . from my point of view, I think that John possibly should step aside at least until the whole story's out." And it's not just vegetable growers that stand to lose, the report relays. Packaging company Qualipack is also one of Bunny Bites' creditors. ABC relates that Qualipack marketing manager Kees Versdeeg agrees that Ausveg has been conspicuously silent on the issue. "When any other agricultural company or supplier goes into receivership or is going through hardship, it's always mentioned in the news and by Ausveg. There's no mention of the saga or financial problems that's been with Bunny Bites," ABC News Mr. Versdeeg, as cited by ABC, said. But Ausveg spokesman, William Churchill, said there have been many other cases where the organisation has not commented on failed vegetable companies, according to ABC. Mr. Churchill denies there is a conflict of interest and John Brent is yet to speak publicly on the matter, the report adds. Bunny Bites Foods is a Queensland-based vegetable processing company. MP CONSTRUCTIONS: Hall Chadwick Appointed as Administrators ----------------------------------------------------------- Patrick Stafford at SmartCompany reports that MP Constructions has collapsed into administration, the latest victim of an industry which continues to suffer at the hands of subdued activity in both property and retail. MP Constructions was placed in administration on July 15, with Hall Chadwick appointed, SmartCompany discloses. According to the report, the company has significant reach in the industry, with AUD18 million in turnover last financial year and projects including fit-outs for Supre, Telstra stores, Billabong and Lush, along with commercial interior work for KPMG and Marriott. Administrator Blair Pleash -- bpleash@hallchadwick.com.au -- told SmartCompany the company continues to trade. Mr. Pleash said the business has been facing industry pressures and entered administration due to issues with working capital, SmartCompany relates. "We're trading the business with a view to...market the business and components," SmartCompany quotes Mr. Pleash as saying, although acknowledging the appointment is still at an early stage. Brisbane-based MP Constructions is a commercial construction company specialising in Shop Fitouts and Shop Fittings, Commercial Construction and Joinery. PACIFIC HORIZON: Trading Entities Placed in Receivership -------------------------------------------------------- Brendon James Gibson -- bgibson@kordamentha.com -- and Grant Robert Graham -- ggraham@kordamentha.com -- of Kordamentha were appointed Joint and Several Receivers and Managers of the trading entities related to Pacific Horizon Motorhomes on July 15, 2013. No future bookings are being accepted. The companies in receivership are: Pacific Horizon Limited Eclipse Travel Homes Limited Pacific Horizon Motorhomes Limited Pacific Horizon Motorhomes offers motorhome and campervan hire in New Zealand. TRUE NORTH: Clifton Hall Appointed as Liquidators ------------------------------------------------- Timothy Clifton and Mark Hall of Clifton Hall were appointed as Joint and Several Liquidators of True North Organisational Development Pty Ltd on July 16, 2013. The first meeting of creditors will be held at 10:30 a.m. on July 26, 2013, in the offices of Clifton Hall, Level 4, 12 Gilles Street, Adelaide. WICKHAM SECURITIES: ASIC Extends Freezing Orders in Collapse ------------------------------------------------------------ The Australian Securities and Investment Commission, on July 15, 2013, successfully applied for orders in the Federal Court to add five defendants to existing proceedings brought against Bradley and Deborah Sherwin and eight related corporate entities on Jan. 21, 2013. Orders were also obtained freezing the assets of the new defendants for the time being which included three companies connected to Mr. and Mrs. Sherwin as well as Garth Robertson (the former CEO of Wickham Securities Ltd) and his wife. The new orders bring the number of defendants in the proceedings to 15. The new defendants are Brothers Financial Services Pty Ltd, NRL Financial Services Pty Ltd, Sunshine Regional Investments Pty Ltd, Garth Peter Robertson and Catherine Louise Robertson. Legal representatives of the new defendants did not oppose the making of the orders. On Jan. 21, 2013, ASIC commenced proceedings under section 1323 of the Corporations Act 2001 seeking orders in the Federal Court against ten defendants to preserve assets for the benefit of investors whose funds had been applied to Wickham and other corporate entities connected to Bradley Sherwin and against his wife, Deborah Sherwin. Those companies were: -- Sherwin Financial Planners Pty Ltd -- DIY Superannuation Services Pty Ltd -- Reacroft Pty Ltd -- Blue Diamond Investments Pty Ltd -- SP Property Pty Ltd -- Astor Funds Pty Ltd -- Sherwin Financial Services Pty Ltd, and -- Wickham Capital Pty Ltd. ASIC sought interim orders pending the outcome of its investigation, which is ongoing, to preserve assets for the benefit of investors, largely self-managed superannuation funds. The orders were extended by the Federal Court when the matter was heard inter-parties on Jan. 23, 2013, and remain in place save to the extent of Sherwin Financial Planners Pty Ltd, DIY Superannuation Services Pty Ltd, Reacroft Pty Ltd, Blue Diamond Investments Pty Ltd, SP Property Pty Ltd, Astor Funds Pty Ltd and Wickham Capital Pty Ltd. Those companies are now in liquidation and the companies' assets are in the control of the appointed liquidators Stefan Dopking, Quentin Olde and Michael Ryan of FTI Consulting. Wickham Securities Ltd was placed into administration in December 2012 in advance of ASIC's proceedings and is now in liquidation. Grant Sparks and David Leigh of PPB Advisory are the liquidators of that company. In the circumstances asset protection orders were not sought against Wickham Securities Ltd. PPB and FTI are cooperating with ASIC's investigation. About Wickham Securities Wickham Securities Limited is a Brisbane-based financial services company. Director Bradley Sherwin appointed Messrs. Grant Sparks and David Leigh of PPB in Brisbane as administrators to the company on Dec. 21, 2012. On Jan. 24, 2013, Stefan Dopking -- stefan.dopking@twcs.com.au, Quentin Olde -- quentin.olde@twcs.com.au -- and Michael Ryan -- michael.ryan@twcs.com.au -- of Taylor Woodings were appointed Voluntary Administrators to the following companies in the Wickham Financial Group: * Astor Funds Pty Ltd * Blue Diamond Investments Pty Ltd * DIY Superannuation Services Pty Ltd * Reacroft Pty Ltd * Sherwin Financial Planners Pty Ltd * SP Property Pty Ltd * Wickham Capital Pty Ltd * AUSTRALIA: ATO to Chase Companies Practicing "Phoenix" Activity ----------------------------------------------------------------- Dissolve.com.au reports that the Australian Tax Office has set its plan to chase approximately 150 cases of potentially fraudulent scheme, called "phoenix" activity. The taxman defines this as when a company collapses and its owner re-establishes it, the report says. According to Dissolve.com.au, the ATO said they have determined more than 2,000 property developers who have put certain companies into liquidation with goods and services obligations on various occasions. Dissolve.com.au relates that the ATO emphasised a threat to penalise companies in breach. The tax office will demand such companies lodge and pay their business activity statements, the report relays. The report notes that the tax office warned that they will have to make use of fresh director penalty regime so that directors will personally be held liable for the outstanding superannuation and PAYG withholding liabilities of their company. The extreme cases will be referred by the ATO to the criminal prosecutor or securities watchdog, according to Dissolve.com.au. The ATO said liquidating a business to dodge tax obligations has been popular in the labour hire industry, Dissolve.com.au says. It has also been observed among property developers who decided not to be involved with the tax system during development and end up not able to meet GST obligations, the report adds. ========= C H I N A ========= SHIMAO PROPERTY: Moody's Changes Outlook on Ba3 CFR to Stable ------------------------------------------------------------- Moody's Investors Service has changed to positive from stable the outlook of Shimao Property Holdings Limited's Ba3 corporate family rating and B1 senior unsecured bond rating. Moody's has also affirmed Shimao's Ba3 corporate family rating and B1 senior unsecured bond rating. "The change in outlook to positive reflects our expectation that Shimao's financial profile will improve following a shift in its business strategy," says Franco Leung, a Moody's AVP/Analyst. Shimao has demonstrated a good track record of sales execution since it fine-tuned its business strategy in 2011. It adjusted its product mix to focus more on the mass market by marketing to first-time home buyers and up-graders, and offering more small-to- medium-sized units. In the first six months of 2013, Shimao achieved RMB32.5 billion in contract sales, a 44.5% year-on-year increase, or 59% of its full-year target of RMB55 billion for 2013. Moody's believes Shimao is on track to deliver its sales target, based on available projects for sale in the rest of 2013. "Moreover, Shimao has improved its debt leverage and will likely keep the current level in the next 12-18 months," says Leung, also Shimao's lead analyst. Shimao's adjusted debt / capitalization declined to about 53% as at end-2012 from 56.7% as at end-2011 due to improved operating cash flow from stronger contract sales. Moody's expects Shimao to maintain debt leverage at around 50%-55% in the next 12-18 months. Moreover, its adjusted EBITDA interest coverage will improve to around 3.0-3.5x in 2013 from 2.2x in 2012 as more revenue will be booked on the back of the strong contracted sale achieved in 2012. "Shimao's liquidity position has strengthened as it adopts a proactive approach to capital management," says Leung. Shimao concluded a 4-year, multi-currency club loan of $570 million in June 2013, following the issuance of senior notes of $800 million in January 2013 and the conclusion of a 3-year $670 million multi-currency club loan in November 2012. It has also redeemed the 8% senior notes due 2016 for a principal amount of $350 million in July 2013. As a result, Shimao's overall debt maturity profile has lengthened. "Shimao's strategy of buying land based on its sales performance has helped keep its debt level in check," adds Leung. As a result of the new land acquisition strategy, Shimao's total land premium of RMB8.9 billion in 2012 was lower than those in prior years -- RMB11.0 billion in 2011 and RMB15.0 billion in 2010. Moody's believes that if Shimao is successful in its contract sales, it will resume land acquisitions to replenish its land bank. Shimao's Ba3 corporate family rating continues to reflect its track record of generating contract sales on a large scale, its diversified and well-located land bank, its pricing flexibility -- in view of its low-cost land bank -- and its portfolio of quality investment properties. Shimao's ratings could be upgraded if it (1) continues to meet its presales targets; (2) maintains a sufficient cash balance to cover maturing debt in the next 12 months; (3) demonstrates that it has adequate room in complying with its financial covenants, such as EBITDA interest coverage of more than 3x; and (4) improves debt leverage to around 50% -55% on a sustained basis. On the other hand, the outlook would return to stable if (i) its sales performance is below target; or (ii) improvements in its credit metrics slow, such that EBITDA interest coverage fails to reach 3X or debt/total capitalization returns to 55% or above. The principal methodology used in rating Shimao was the Global Homebuilding Industry Methodology, published March 2009. Shimao Property Holdings Ltd is a Grand Cayman-incorporated Chinese property developer that was listed on the Hong Kong Stock Exchange in July 2006. Together with its 64%-owned Shanghai A- share listed subsidiary, Shanghai Shimao Co, Ltd, the company has an attributable land bank of 36.2 million sqm distributed in 39 cities, mainly in eastern and northeastern China. Shanghai Shimao mainly develops commercial properties and has an attributable land bank of around 8.54 million sqm. Shimao also has six hotels in operation with a total of 2,679 rooms. ========= I N D I A ========= COIMBATORE ROLLER: CRISIL Reaffirms 'BB' Rating on INR73MM Loans ---------------------------------------------------------------- CRISIL's ratings on the bank facilities of Coimbatore Roller Flour Mills Pvt Ltd continue to reflect the benefits that CRF derives from its established market position in the wheat flour industry and its promoters' extensive industry experience. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 73.00 CRISIL BB/Stable (Reaffirmed) Pledge Loan 20.00 CRISIL A4+ (Reaffirmed) These rating strengths are partially offset by CRF's below-average financial risk profile, marked by a small net worth and a high gearing, and susceptibility of the company's operating margin to volatility in prices of raw material because of intense competition in the wheat products industry. Outlook: Stable CRISIL believes that CRF will continue to benefit over the medium term from its promoters' extensive experience in the wheat flour industry. The outlook may be revised to 'Positive' in case the company reports significant improvement in its capital structure driven by improvement in cash accruals or equity infusion. Conversely, the outlook may be revised to 'Negative' in the event of pressure on the company's liquidity, resulting most likely from larger-than-expected working capital requirements or debt-funded capital expenditure or increase in investments in group companies. CRF, set up in 1962, manufactures and sells ground wheat products such as atta, maida, bran, and suji. CORE EDUCATION: Moody's Withdraws B2 CFR and Negative Outlook ------------------------------------------------------------- Moody's Investors Service has withdrawn its B2 corporate family rating with a negative outlook on Core Education & Technologies Limited due to business reasons and at the company's request. Ratings Rationale: Moody's has withdrawn the rating for its own business reasons. CORE, headquartered in India, provides technology-enabled products and services primarily to the education sector. ELICO LTD: CRISIL Raises Rating on INR94MM Loan to 'B+' ------------------------------------------------------- CRISIL has upgraded its rating on the long-term bank facilities of Elico Ltd to 'CRISIL B+/Stable' from 'CRISIL B/Stable', and has reaffirmed its rating on the company's short-term facilities at 'CRISIL A4'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 94.0 CRISIL B+/Stable (Upgraded from 'CRISIL B/Stable') Post Shipment Credit 20.0 CRISIL A4 (Reaffirmed) Letter of Credit & 30.0 CRISIL A4 (Reaffirmed) Bank Guarantee The rating upgrade reflects the improvement in Elico's business risk profile, driven by a sustained increase in its scale of operations while maintaining its healthy profitability margins. The upgrade also factors in the increase in the company's net worth, supported by healthy accretion to reserves, and the consequent improvement in its capital structure. CRISIL believes that Elico will maintain its improved capital structure over the medium term, on the back of a continued growth in its net worth and the absence of any major debt-funded capital expenditure. Elico registered a compound annual growth rate of around 17 per cent in its revenues from 2010-11 (refers to financial year, April 1 to March 31) and 2012-13; its operating profit margin remained healthy at 17 to 19 per cent over this period. CRISIL believes that Elico will continue to register healthy growth in its revenues over the medium term supported by its established relationships with customers. The healthy accretion to reserves, arising from the company's revenue growth and healthy operating profit margin, is estimated to have resulted in an improvement in Elico's net worth to INR130 million as on March 31, 2013 from INR73 million as on March 31, 2011. The improvement in the company's net worth, coupled with repayment of term loans, is estimated to have resulted in a decline in its gearing to around 1.5 times as on March 31, 2013 as compared with 3.2 times as on March 31, 2011. The ratings, however, continue to reflect Elico's working-capital- intensive nature of operations, and its average financial risk profile marked by its modest net worth, moderate gearing, and average debt protection metrics. These rating weaknesses are partially offset by the extensive experience of Elico's promoters in the analytical instrumentation and electronics industry. Outlook: Stable CRISIL believes that Elico will continue to benefit over the medium term from its promoters' extensive industry experience and its established relationships with customers. The outlook may be revised to 'Positive' if there is a significant and sustained improvement in the company's revenues and profitability margins, or a substantial increase in its net worth most likely supported by equity infusion by promoters. Conversely, the outlook may be revised to 'Negative' in case of a steep decline in Elico's profitability margins, or significant deterioration in its capital structure, most likely because of larger-than-expected working capital requirements. Elico was established in 1960 in Hyderabad (Andhra Pradesh) by Mr. Ramesh Datla. The company manufactures a wide range of electrochemistry, spectroscopy, and chromatography equipment used in diverse industries, including agriculture, engineering, and research laboratories. It also provides software services and back-office support to international clients; these services include medical transcription, coding, and billing. PRAJAY PROPERTIES: CRISIL Places 'D' Ratings on INR1.22BB Loans --------------------------------------------------------------- CRISIL's rating on the bank facilities of Prajay Properties Pvt Ltd (PPPL; a part of the Prajay group) continues to reflect instances of delay by PPPL in servicing its debt; the delays have been caused by the company's weak liquidity. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Project Loan 1,213.0 CRISIL D Proposed Long-Term 7.0 CRISIL D Bank Loan Facility The Prajay group is also exposed to risks related to completion and saleability of its Prajay Megapolis project and to concentration of revenue in a single project. The rating also factors in the risk associated with the Indian real estate industry. These rating weaknesses are partially offset by the extensive industry experience and proven project-execution capabilities of the Prajay group's promoters and its strong brand. For arriving at the rating, CRISIL has combined the business and financial risk profiles of PPPL and Prajay Land Capital Pvt Ltd, together referred to as the Prajay group. This is because each company owns a part of the land on which the Prajay Megapolis project is being constructed and PPPL will pay a revenue share to PLCPL for the proportion of land owned by the latter. Incorporated in March 2007, PPPL is a special-purpose vehicle promoted by Prajay Engineers Syndicate Ltd to develop 17.125 acres (of a total of 21.125 acres) of the high-rise residential project, Prajay Megapolis, in Hyderabad (Andhra Pradesh). PESL own 49.5 per cent stake in PPPL; the remainder is owned by the promoters in their individual capacity. State General Reserve Fund, Oman, has invested about INR659 million in PPPL by way of compulsory convertible debentures. PPPL is developing 4.50 million square feet of built-up area of the high-rise residential apartments. Excavation at the project site is currently in progress. PLCPL is the wholly owned subsidiary of PPPL and owns 8.35 acres of land out of 17.125 acres under development. SEASAGA ENTERPRISES: CRISIL Raises Ratings on INR169.5MM Loans -------------------------------------------------------------- CRISIL has upgraded its long term rating on bank facilities of Seasaga Enterprises Private Limited from 'CRISIL B/Stable' to 'CRISIL B+/Stable' and reaffirmed its short term rating to 'CRISIL A4'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bill Discounting 100 CRISIL B+/Stable (Upgraded from 'CRISIL B/Stable') Packing Credit 90 CRISIL A4(Reaffirmed) Proposed Long-Term 29.9 CRISIL B+/Stable (Upgraded Bank Loan Facility from 'CRISIL B/Stable') Proposed Term Loan 39.6 CRISIL B+/Stable (Upgraded from 'CRISIL B/Stable') The upgrade follows sustained improvement in SEPL's financial risk profile backed by reduced working capital requirements and stronger net cash accruals. With the management's focus towards lowering working capital requirements, GCA has improved to about 80 days as on March 31, 2013 from close to 110 days in the preceding year. Though faster inventory turnaround and extension of lower credit to customers led to a slight decline in profitability in 2012-13, this was more than offset by an estimated 36% increase in revenues year-on-year, leading to stronger net cash accruals of about INR17 million in 2012-13. The above factors have together led to a reduction in the company's reliance on debt, marked by an improvement in gearing to about 2.6 times as on March 31, 2013 from 3.5 times in the preceding year, along with an improvement in debt protection indicators. The company's gearing levels are expected to improve further to about 2 times over the medium term with sustenance of its current working capital cycle and steady accretion to reserves. The debt protection indicators too are expected to improve in tandem. SEPL's credit risk continues to be marked by modest scale of operations, problems in availability of marine products and susceptibility to global economic downturn. These weaknesses are partially offset by promoter's extensive experience of over five decades in marine exports, diversified customer base and strong financial risk profile supported by improving capital structure and comfortable debt protection metrics. Outlook: Stable CRISIL believes that SEPL will continue to benefit over the medium term from its diverse customer base and promoters' industry experience. The outlook may be revised to 'Positive' if SEPL records higher than expected sales, along with improved and consistent operating margins and working capital cycle. Conversely, the outlook may be revised to 'Negative' if SEPL reports lower-than-expected net cash accruals, and larger-than- expected working capital requirements, large debt funded capital expenditure adversely affecting its capital structure. SEPL was incorporated in 1993 as Sky Fish Pvt Ltd, promoted by Mr. Y M Elias, and its name was changed to the current one in 2007. SEPL is the business of processing and exporting frozen, raw marine products such as fish, shrimps, lobsters, and squids. The company's main export markets are Europe, China, the Middle East and other countries. SEPL is estimated to report a profit before tax (PBT) of INR14 million on net sales of INR714 million for 2012-13, against a PBT of INR11 million on net sales of INR557 million for 2011-12. SHAFA EDUCATIONAL: CRISIL Reaffirms 'D' Ratings on INR500MM Loans ----------------------------------------------------------------- CRISIL's ratings on the bank facilities of Shafa Educational Society continue to reflect instances of delays in servicing its debt; the delays have been caused by the society's weak liquidity. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 100 CRISIL D (Reaffirmed) Cash Credit 10 CRISIL D (Reaffirmed) Long-Term Loan 311 CRISIL D (Reaffirmed) Proposed Long-Term 79 CRISIL D (Reaffirmed) Bank Loan Facility SES also has an average financial risk profile, marked by high gearing, and average debt protection metrics. Furthermore, the society is susceptible to geographical concentration in its revenue profile and to adverse impact of regulatory changes in the educational sector. However, the society benefits from its established regional presence, supported by its promoter's extensive experience in the education sector. Update In 2012-13 (refers to financial year, April 1 to March 31), SEC reported provisional revenues of around INR266 million, at a year- on-year growth of 17 per cent, from INR227 million in 2011-12. It has an average financial risk profile marked by high gearing of around 1.7 times, and moderate net worth of around INR191 million as on March 31, 2013. SEC also maintained its moderate debt protection metrics, marked by net cash accruals to total debt (NCATD) and interest coverage ratios at 0.19 times and around 2.2 times, respectively, in 2012-13. However, the society's net cash accruals during the year were inadequate to fund its debt obligations. Hence, its liquidity was stretched, because of full utilisation of its cash credit limit, and small net cash accruals vis-a-vis debt obligations. SEC reported a surplus of INR0.66 million on revenues of INR226.64 million in 2011-12, against a surplus of INR0.43 million on revenues of INR211.46 million for 2010-11. Set up in 2001 in Kurnool (Andhra Pradesh), SES runs two institutes providing courses in medicine and nursing. Both institutes are approved by Dr. NTR University of Health Sciences, Vijaywada, and the Medical Council of India. SHAMKO EXIM: CRISIL Rates INR20MM Bill Discounting Loan at 'B' -------------------------------------------------------------- CRISIL has assigned its 'CRISIL B/Stable/CRISIL A4' ratings to the bank facilities of Shamko Exim Pvt Ltd. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Packing Credit 20 CRISIL A4 Bank Guarantee 110 CRISIL A4 Bill Discounting 20 CRISIL B/Stable The rating reflects SEPL's modest scale of operations, and the susceptibility of its margins to fluctuations in foreign exchange (forex) rates. The rating also factors in the company's below- average financial risk profile, marked by a modest net worth and weak debt protection metrics. These rating weaknesses are partially offset by the extensive experience of SEPL's promoters in the granite block trading business. CRISIL has factored the support expected to be extended to its subsidiary 'Green Span Inc Fze' (GSIF) while assessing the credit profile of SEPL. GSIF is a 100 per cent subsidiary of SEPL set up in Dubai, UAE in June 2013 for trading in petrol and diesel. Outlook: Stable CRISIL believes that SEPL will continue to benefit over the medium term from the extensive experience of its promoters in the granite block trading business. The outlook may be revised to 'Positive' in case SEPL achieves significant and sustained improvement in its revenues, while maintaining its margins and improving its capital structure. Conversely, the outlook may be revised to 'Negative' in case SEPL registers a significant decline in its revenues or margins, or if the support to group entities is significantly larger than envisaged thereby impacting its financial risk profile. SEPL was incorporated in July 2003 by Mr. K M Veeresh and his family members. The company trades in granite blocks. SEPL's day- to-day operations are managed by Mr. K M Veeresh. Its registered office is located in Hospet (Karnataka). SHRAMAN POLYMERS: CRISIL Rates INR50MM Cash Credit at 'B' --------------------------------------------------------- CRISIL has assigned its 'CRISIL B/Stable/CRISIL A4' ratings to the bank facilities of Shraman Polymers Pvt Ltd. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 50 CRISIL B/Stable Letter of Credit 10 CRISIL A4 The ratings reflect SPPL's weak financial risk profile, marked by a small net worth and a high gearing, and the vulnerability of the company's margins to volatility in raw materials prices. These rating weaknesses are partially offset by the extensive experience of SPPL's promoters and the company's established customer base in the rubber chemicals industry and efficient working capital management. Outlook: Stable CRISIL believes that SPPL will continue to benefit over the medium term from its promoters' extensive experience and its established customer base in the rubber chemicals industry. The outlook may be revised to 'Positive' if the company registers more-than-expected revenues, while it sustains or improves its operating margin along with improvement in its capital structure, resulting in improvement in its financial risk profile. Conversely, the outlook may be revised to 'Negative' in case SPPL registers decline in its revenues or profitability or in case of lengthening of its working capital cycle constraining its financial flexibility. SPPL was set up in 1994 by Mrs. Alka Pahwa and her family in Malerkotla (Punjab); it commenced operations in 2008. The company trades in carbon black (used as a reinforcing agent in the rubber industry and other industries) in the domestic market. V3 MEGACORP: CRISIL Assigns 'B+' Ratings to INR160MM Loans ---------------------------------------------------------- CRISIL's ratings on the bank facilities of V3 Megacorp International Pvt Ltd (V3; formerly known as V3 Powerpetro Fabricators Private Limited) continue to reflect V3's below- average financial risk profile, marked by high gearing, its working-capital-intensive operations, and its exposure to risks related to any slowdown in capital investment in the economy. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 65.00 CRISIL A4 Cash Credit 125.00 CRISIL B+/Stable Long-Term Loan 15.00 CRISIL B+/Stable Letter of Credit 60.00 CRISIL A4 Letter of Credit 20.00 CRISIL B+/Stable These rating weaknesses are partially offset by the extensive experience of V3's promoter in the steel fabrication industry, and the company's robust order book. Outlook: Stable CRISIL believes that V3 will continue to benefit from its promoter's extensive industry experience, over the medium term. The outlook may be revised to 'Positive' if the company improves its financial risk profile, supported by an increase in its scale of its operations, higher profitability, and significant improvement in its working capital management. Conversely, the outlook may be revised to 'Negative' if V3 contracts more-than- expected debt to fund its capital expenditure or working capital requirements, or if its debt protection metrics deteriorate. V3, incorporated in 2006, is promoted by Mr. Vighnaprabodhan Thanneermalai. The Chennai (Tamil Nadu)-based company operates in the steel fabrication business. V3 fabricates structural components which are mainly used in the power, cement, and sugar industries, and in industrial plants. For 2012-13 (refers to financial year, April 1 to March 31), V3 is estimated to have registered a net profit of INR5.1 million on net sales of INR555.3 million, against a net profit of INR4.9 million on net sales of INR551.4 million reported for the preceding year. VANTAGE SPINNERS: CRISIL Assigns 'B-' Ratings to INR540MM Loans --------------------------------------------------------------- CRISIL has assigned its 'CRISIL B-/Stable' rating to the long-term bank facilities of Vantage Spinners Pvt Ltd. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 180.0 CRISIL B-/Stable Long-Term Loan 330.0 CRISIL B-/Stable Proposed Cash Credit 30.0 CRISIL B-/Stable Limit The rating reflects VSPL's below-average financial risk profile, marked by a weak capital structure, and its susceptibility to volatility in raw material prices; the rating also factors in VSPL's large working capital requirements. These rating weaknesses are partially offset by the extensive experience of VSPL's management in the cotton industry. Outlook: Stable CRISIL believes that VSPL will continue to benefit over the medium term from the extensive industry experience of its management in the cotton industry. The outlook may be revised to 'Positive' if there is a substantial and sustained improvement in VSPL's cash accruals or there is substantial increase in its net worth on the back of equity infusion by the promoters, resulting in improved capital structure. Conversely, the outlook may be revised to 'Negative' if there is a steep decline in the company's revenues and profitability or there is a significant deterioration in its capital structure on account of larger-than-expected working capital requirements or large debt-funded capital expenditure. VSPL was incorporated on July 28, 2006, by Mr. Potluru Mohana Murali Krishna, Mr. Potluru Soma Sekhar, and Ms. Nandamuri Meenalatha. VSPL manufactures cotton yarn and has an installed capacity of 31,000 spindles. The plant is located at Nuziveedu Mandalam, in Krishna District (Andhra Pradesh). VARUN FERTILIZERS: CRISIL Reaffirms B+ Ratings on INR117.5MM Loan ----------------------------------------------------------------- CRISIL's rating on the bank loan facilities of Varun Fertilizers Pvt Ltd continues to reflect its large working capital requirements, and business susceptibility to government regulations and monsoon. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 100.0 CRISIL B+/Stable (Reaffirmed) Term Loan 17.5 CRISIL B+/Stable (Reaffirmed) These rating weaknesses are partially offset by the expected improvement in its financial and business risk profiles, driven by the commencement of single super phosphate (SSP) manufacturing in 2013-14 (refers to financial year, April 1-March 31); support from the Government of India, Department of Fertilizer in the form of subsidies; and the extensive experience of VFPL's management in the fertiliser industry. Outlook: Stable CRISIL believes that VFPL will benefit from the extensive industry experience of its management, and commencement of production at its SSP plant. The outlook may be revised to 'Positive', if the company increases the scale of its operations, leading to an increase in its net cash accruals, while efficiently managing its working capital. Conversely, the outlook may be revised to 'Negative' if VFPL's working capital cycle deteriorates, resulting in larger-than-expected dependence on external bank funds for its working capital requirements, thereby weakening its financial risk profile or the company's inability to scale-up operations; or any adverse impact resulting from regulatory changes, leading to a weakening in its business risk profile. Update VFPL's SSP plant was expected to commence production in 2012-13; however, procedural delays prevented it from beginning commercial operations in 2012-13. Despite the delay, the company's revenues increased to an estimated INR220 million in 2012-13, from INR41.6 million in 2011-12, driven by an increase in sales of nitrogen- phosphorous-potassium (NPK). However, VFPL's operating profitability declined to an estimated 7.8 per cent in 2012-13, from 12.8 per cent in 2011-12, on account of raw material price fluctuations, and an increase in fixed overheads. CRISIL believes that VFPL's revenues and operating profitability will improve over the near to medium term, as the SPP plant begins contributing to the company's revenues. VFPL is expected to achieve a sharp increase in its top line to more than INR670 million in 2013-14, from INR220 million in 2012-13, primarily supported by revenues from the SSP plant. However, VFPL's financial risk profile could be adversely affected by an increase in its working capital requirement, resulting from its expected sharp increase in revenues during 2013-14. The company's gearing is expected to increase to around 3.7 times in the near term, from a moderate 1.7 times as on March 31, 2013. VFPL will likely depend on external debt for its working capital requirements over the near-term. The company's financial risk profile is expected to remain constrained over the near to medium term, on account of its expected small net worth of INR74.5 million as on March 31, 2014, and considerable dependence on debt funding. VFPL's liquidity profile is also expected to remain constrained in the near term, driven by its high bank limit utilisation to fund working capital requirements. The company is expected generate healthy cash accruals of around INR33.5 million, with fixed debt obligations of around INR7 million during 2013-14. While increase in sales, are expected to lead to substantial increase in accruals, the working capital intensity is expected to lead to continued dependence on short-term funding. Hence, the company's liquidity profile is likely to remain constrained in the near- term, with a stretched working capital cycle, marked by gross current asset (GCAs) of around 250 days over the medium term. CRISIL believes that VFPL's working capital cycle will remain stretched, also because of an increase in debtors and inventory. VFPL was incorporated in 2005 in Indore, Madhya Pradesh. The company manufactures fertilisers such as NPK and SSP. It has a manufacturing capacity of 150,000 tonnes per annum (TPA) of NPK and 120,000 TPA of SSP, at its plant in Indore (Madhya Pradesh). VFPL was initially promoted by Mr. Shailesh Solanki, and his friends, and was managed by Mr. Santosh Dubey. Subsequently, Mr. Ashish Tiwari and Mr. Abhishek Tiwari, acquired the company. VFPL reported, on provisional basis, a profit after tax (PAT) of INR9.2 million on net sales of INR220 million in 2012-13, and a PAT of INR2.0 million on net sales of INR41.6 million for 2011-12. VEDANT HOSPITAL: CRISIL Assigns 'D' Ratings to INR120MM Loans ------------------------------------------------------------- CRISIL has assigned its 'CRISIL D/CRISIL D' ratings to the bank facilities of Vedant Hospital. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Term Loan 40 CRISIL D Proposed Long-Term 30 CRISIL D Bank Loan Facility Bank Guarantee 7 CRISIL D Letter of Credit 43 CRISIL D The ratings reflect instances of delay by Vedant in servicing its debt; the delays have been caused by the firm's weak liquidity. Vedant is also exposed to risks associated with the implementation of its ongoing project. Furthermore, the firm is expected to have a modest scale of operations with geographical concentration, and also a below-average financial risk profile marked by a modest net worth and weak debt protection metrics, over the medium term. However, Vedant will benefit from its promoters' extensive experience in the hospital industry. Vedant, a partnership firm, was established by Mr. Balkrishna Shetty and his wife Mrs. Lata Shetty in 2009. It is setting up a 150-bed multi-speciality hospital at Thane in Mumbai (Maharashtra). The project is in advanced stage of completion; the hospital is likely to commence operations in 2013-14 (refers to financial year, April 1 to March 31). ================= I N D O N E S I A ================= LIPPO KARAWACI: Fitch Affirms 'BB-' LT Issuer Default Ratings ------------------------------------------------------------- Fitch Ratings has affirmed Indonesia-based property developer PT Lippo Karawaci Tbk's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB-' and its National Long-Term Rating at 'A+(idn)'. The Outlook is Stable. Simultaneously, the agency has also affirmed Lippo's senior unsecured rating at 'BB-'. Lippo's 'BB-' ratings reflect its small scale and aggressive growth plans against its leading position in property development and healthcare provider in Indonesia. Key Rating Drivers Leading market position: Lippo's ratings reflect its leading position as Indonesia's largest publicly listed property developer in revenue (2012: IDR6.2trn) and one of the landbank inventories with more than 1,400 hectares at end-March 2013. Its leading position is also reflected in a strong property portfolio comprising more than 10 hospitals, 30 malls and 8 hotels under Lippo's ownership or management. Strong recurring income: As one of the leading healthcare players in Indonesia, healthcare operations contributed 19% (IDR320bn) of total EBITDA at end-2012. This, together with fee-based income and malls & hotel operations, results in recurring EBITDA of IDR683bn (40% of EBITDA) per year. Fitch expects these recurring income will provide more than adequate resources for interest payment. Recurring EBITDA/interest was 1.5x at end-December 2012. Performance improvement continues: Lippo's scale and credit metrics have been improving since 2009 with average growth of 34% in revenue and 41% in EBITDA. The growth has also been accompanied by an expanding recurring EBITDA base to IDR683bn in 2012 from IDR574bn in 2011. Fitch believes that the improvement in performance will continue with a stronger recurring revenue base from more hospitals, malls, and hotels in the development pipeline. Self-funded expansion: Lippo can recycle its hospitals and malls through a real estate investment trust (REIT) to generate funding to support its expansion plans. This was evident during 2012 with the sale of two malls to Lippo Malls Indonesia Retail Trust and two hospitals to First REIT. However, this asset light strategy hinges on the ability of these sponsored REITS to raise additional capital. Lippo's pipeline includes 14 hospitals and 12 new malls. Comfortable liquidity: Fitch expects Lippo's liquidity to remain comfortable in the medium term as it continues to fund most of development cost through pre-sales and sales of assets to its REITS. At end-2012, Lippo exceeded its marketing sales target by 22% with IDR4.6trn marketing sales. Additionally, Lippo has a long debt maturity profile with negligible debt amortisation schedule until 2019 and unutilised working capital facilities of approximately USD40m. Further, Fitch draws comfort from the company's disciplined approach to expansion, which includes high cash balances. Scale and aggressive expansion: Lippo's 'BB-' ratings are constrained by its small scale compared with 'BB' rated entities. Lippo's EBITDA only amounted to USD174m at end- 2012. The ratings are also constrained by Lippo's aggressive expansion plan for its malls and hospitals operations until 2015. Funds for expansion will be partially obtained from continued sale of healthcare and retail mall assets to its REITS. Potential Cikarang structural subordination: Lippo Cikarang, which is being built by PT Lippo Cikarang Tbk of which Lippo is a majority shareholder with a 54.3% interest, is a significant revenue contributor. The project represented 44% of Lippo's total marketing sales in 2012. There is currently no leverage within this entity; however, structural subordination of Lippo to the entity's cash flows could arise if debt is incurred by Lippo Cikarang Tbk. Rating Sensitivities Negative: Future developments that may, individually or collectively, lead to negative rating action include: -- Recurring EBITDAR fixed-charge cover falling below 1.25x (2012: 1.3x) on a sustained basis -- Failure to pre-fund its projected capex No positive rating action is expected over the medium term given the issuer's small size and aggressive capital expenditure plan. However, the National Rating may be upgraded if there is a strengthening in the fixed-charge coverage ratio. The following instruments have been affirmed: -- USD250m senior unsecured notes due in 2019 at 'BB-'. -- USD273m senior unsecured notes due in 2020 at 'BB-'. -- USD130m senior unsecured notes due in 2020 at 'BB-'. ========= J A P A N ========= EACCESS LTD: Moody's Affirms Ba2 CFR with Stable Outlook -------------------------------------------------------- Moody's Japan K.K. has affirmed the senior unsecured debt of eAccess Ltd and its Issuer ratings at Ba2. The outlook is changed to stable from developing reflecting Moody's rating action concluding the review on parent SoftBank Corp.'s on July 18, 2013. Ratings Rationale: The rating affirmation considers the strategic benefits to eAccess from SoftBank's greater size, marketing and branding organization, and access to capital. There are also synergies from access to a larger subscriber base for eAccess' 1.7GHz spectrum which is not licensed to SoftBank. Including eAccess' subscriber and revenue base, Softbank group is now Japan's 2nd largest wireless operator. Moody's has incorporated such expected support and equalized eAccess' rating to that of SoftBank. The stable outlook mirrors the same and preceding rating action on SoftBank. Moody's notes that SoftBank has not guaranteed nor is explicitly supporting eAccess' debt, and has only 33.29% governance control of the company. However, there is, in Moody's opinion, the expectation of support, if needed. SoftBank retains nearly all of the economic ownership of eAccess. The company provides an important support, through its LTE spectrum, to SoftBank's mobile product offering and is an increasingly integrated entity in SoftBank's domestic Japanese mobile strategy. Moody's notes that the rating applied to eAccess' unsecured rated debt reflects the effective subordination of bondholders to existing secured bank debt. This subordination lowers the rating assigned to the bonds by one notch. SoftBank will consolidate eAccess' results from the fiscal year ending March 2014 -- which started April 1, 2013 -- as a result of the adoption of International Financial Reporting Standards (IFRS). Ratings would be upgraded if SoftBank's rating is upgraded. Upward rating pressure could emerge if eAccess' financial profile on a standalone basis strengthens. For instance, if debt/EBITDA improves to and remains at about 2.5x, and if EBITDA margin remains above 35%, the rating may be upgraded. Furthermore, if secured debt is paid down or refinanced with unsecured obligations, the effective subordination of the unsecured rated debt would be eliminated and the rating of the unsecured debt upgraded. However, should eAccess' financial metrics deteriorate meaningfully from current levels, a downgrade could be considered. And any future actions indicating a diminished financial or operational support from SoftBank would lead to a review of the rating. The principal methodology used in this rating was Moody's "Global Telecommunications Industry," published in December 2010. eAccess Ltd, headquartered in Tokyo, is a multi-service operator of an asymmetric digital subscriber line (ADSL) business and a mobile broadband business. As a result of delisting from the Tokyo Stock Exchange on December 26, 2012, it is no longer a publicly traded company. SoftBank Corp., headquartered in Tokyo, is a holding company that owns leading global providers of various services, including broadband, fixed-line and mobile telecommunications, software distribution and networking. JLOC 39: S&P Lowers Ratings on Classes B and C Notes to 'D' ----------------------------------------------------------- Standard & Poor's Ratings Services said that it has lowered to 'D (sf)' from 'CCC- (sf)' its ratings on the class B and C trust certificates issued in December 2007 under the JLOC 39 Trust Certificate (JLOC 39) transaction. The class A trust certificates, which S&P had placed on CreditWatch with negative implications on Nov. 15, 2012, redeemed in full on the payment date in July 2013. Meanwhile, S&P lowered to 'D (sf)' its rating on class D on Jan. 29, 2013. The servicer completed the collection from the transaction's remaining specified bond. However, the outstanding principal balance of the specified bond exceeded the amount collected. The specified bond, which defaulted and was backed by a single office building in Tokyo, originally represented about 38.5% of the total issuance amount of the trust certificates. S&P lowered its ratings on classes B and C because it confirmed that the principal on these classes was written down on the principal and interest payment date in July 2013. JLOC 39 is a multiborrower commercial mortgage-backed securities (CMBS) transaction. Specified bonds and a loan issued by 10 obligors secured the trust certificates at the outset of the transaction, and 34 real estate properties and real estate trust certificates initially backed the specified bonds and loan. Morgan Stanley Japan Securities Co. Ltd. (currently, Morgan Stanley MUFG Securities Co. Ltd.) arranged the transaction, and ORIX Asset Management & Loan Services Corp. acted as the servicer. 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 representations, 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 Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS LOWERED JLOC 39 Trust Certificate JPY40.3 billion trust certificates due April 2014 Class To From Initial issue amount Coupon type B D (sf) CCC- (sf) JPY5.4 bil. Floating rate C D (sf) CCC- (sf) JPY3.9 bil. Floating rate SOFTBANK CORP: Moody's Cuts Ratings to Ba1 After Sprint Purchase ---------------------------------------------------------------- Moody's Japan K.K. has downgraded to Ba1 from Baa3 its issuer and senior unsecured bond ratings on SoftBank Corp. The ratings outlook is stable. This concludes the review initiated on October 15, 2012 after SoftBank announced its plan to acquire 70% of the shares of Sprint (formerly Sprint Nextel Corporation) (B1 corporate family rating, on review with direction uncertain). Ratings Rationale: On July 11, SoftBank closed the transaction at an amended price of US$21.6 billion (approximately JPY1.8 trillion) for a total of 78% of the shares. The downgrade to Ba1 reflects Moody's view that 1) the debt- financed acquisition of Sprint will significantly weaken SoftBank's financial flexibility, and 2) the possibility that SoftBank will have to extend additional finance to help Sprint execute its large capital expenditure program of US$16 billion for 2013 and 2014. The rating action also incorporates Moody's concerns over whether Sprint can generate positive free cash flow by the end of FYE12/2015. Sprint has large valuable spectrum assets and its operating performance is improving, but free cash flow remained negative in the latest quarter ended March 2013 due to its large capital expenditures. At the same time, Moody's recognizes 1) SoftBank's strong domestic telecoms operation, backed by its efforts to improve connectivity and other measures to retain existing customers and attract new ones and 2) its position as Japan's No. 2 telecoms operator by revenue size, operating profit and subscriber number. SoftBank's Ba1 rating is based on assessment of the company's standalone financial strength. Moody's views the operation of Sprint and SoftBank as substantially separate. Albeit both companies will share a central strategy, they operate in two separate geographic areas with limited synergies. Additionally, there is no explicit support provided to Sprint. The ratings assessment assumes the acquisition provides no meaningful financial benefit to SoftBank during at least the first two years of ownership. As a stress case, Moody's also assessed SoftBank's financial profile assuming SoftBank will fund, through its standalone cash flow and debt incurrence, Sprint's negative free cash flow over the next two years. In regard to this stress scenario, Moody's notes Sprint may be able to fund much of this capital spending through external funding that SoftBank has noted substantial synergies associated with the acquisition -- primarily in the purchase of equipment and handsets. Moody's estimates the level of SoftBank's consolidated gross debt (excluding Sprint's existing debt) to be around JPY4.8 trillion after including the US$21.6 billion in new debt raised to pay for Sprint. It results in debt/EBITDA coverage of around 4.2x, which is a coverage ratio typical for a single-B company. Moody's Ba1 rating of SoftBank also considers the probable financial support that it will extend to Sprint 's capital investment program over the coming two years. This capex program is designed to upgrade its facilities, which will be critical for turning around Sprint. SoftBank has improved its financial metrics in the last two years, especially its ability to generate higher EBITDA on the back of stronger revenue growth and a steady improvement in its operating margin despite heightened competition. The company's reported EBITDA margin was 32.4 % for FYE3/2013 compared with 30.4% in FYE3/2012. Interest coverage of reported EBITDA less capex improved to 14.9x from 8.3x during the same corresponding period. On the other hand, the acquisition will cause adjusted debt/EBITDA to deteriorate to around 4.2x in FYE3/2014 due to the large increase in debt. In Moody's stress scenario that assumes if negative cash flow continues at Sprint, the ratio would further rise to 4.6x if including the additional debt (totaling approximately US$11 billion for FYE3/2014 and 3/2015) to Sprint for its capital spending. But the ratio should fall back to around 3.0x in FYE3/2016 if SoftBank maintains its stable operating performance in its home market and generates sufficient cash flow from operations to cover its own annual capital expenditure projected to be JPY780 billion for FYE3/2014 and JPY580 billion for FYE3/2015 by the company. The stable outlook reflects Moody's view that the company will maintain its position as the No. 2 telecommunications company in Japan. This strong position supports steady revenue and EBITDA growth, such that the company can adequately service the debt added by the Sprint acquisition as well as further support for its transformation in Moody's view. SoftBank's rating could face upward pressure if it continues to improve profitability and reduces leverage, such that its adjusted EBITDA margin stays above 35% and adjusted debt/EBITDA remains below 2.5 x. In addition, the company will need to demonstrate a continued trend of excellent liquidity and access to capital markets. Any upgrade will also be dependent on the successful implementation of the company's business plan for Sprint and a reduction in potential support from SoftBank. In light of the enormous investment made, negative pressure on SoftBank's rating could emerge if progress in improving Sprint's financial and operational profile does not emerge. Sprint is not expected to generate positive free cash flow until 2015 but other metrics will provide guidance as to the success of the company's efforts. These include increased profit margin, increased subscriber numbers and/or low and trending downward of postpaid churn. Downward rating pressure could also emerge if SoftBank's adjusted EBITDA margin falls below 30%, or if the company's adjusted debt/EBITDA does not trend down to below 3x from Moody's current expectation of between 3-4x for the coming three years. A significant change in SoftBank's position in the Japanese mobile communications market would also lead to negative pressure, as would any significant acquisitions or share buybacks. The principal methodology used in this rating was Moody's "Global Telecommunications Industry," published in December 2010. SoftBank Corp. headquartered in Tokyo, is a holding company that owns leading global providers of various services, including mobile and fixed-line telecommunications, broadband, software distribution, networking and publishing. ==================== S O U T H K O R E A ==================== STX GROUP: Shipbuilding Unit's Future Remains in Limbo ------------------------------------------------------ The Korea Times reports that concerns are growing over a plan by creditors to inject KRW3 trillion into cash-strapped STX Offshore & Shipbuilding because it is uncertain whether the shipbuilder will recover, even with the fresh liquidity. The report relates that experts said the company's full recovery depends on unforeseeable economic factors. The Korea Times notes that even creditors have raised concerns over whether the shipbuilding firm will recover and become profitable again because the sluggish shipbuilding and shipping industry are unlikely to improve soon. "Countries such as China, Brazil and Russia tend to build their own ships and use their own ships in trades. Their shipbuilding skills have become high, so STX Offshore & Shipbuilding might not have a competitive edge against such competitors in near future. It may have a negative impact on the company's full recovery," an official at one of the creditor banks told the Korea Times. "If we inject money, we have to collect it. But there is no guarantee on whether the company will be able to pay it back," he said, adding that his bank is reviewing the rescue proposal, the report relates. The Korea Times reports that KDB, the main creditor, said July 16 that it has drawn up the final rescue plan for the company and asked other seven creditor banks to agree on the proposal for the money pumping into the shipbuilding affiliate of STX Group, the nation's 13th-largest conglomerate. Along with the fresh liquidity of KRW1.8 trillion and other financial support worth KRW300 billion to be supplied by the end of next year, the total amount of liquidity will be around KRW3 trillion given that they have already offered KRW850 billion. The Korea Times says the seven creditors will review the proposal before deciding whether to agree it. They are supposed to give the answer to KDB by July 23. The seven banks are: Export-Import Bank of Korea, NH Bank, the Korea Finance Corp., Woori Bank, Korea Exchange Bank, Shinhan Bank and the Korea Trade Insurance Corp. The scheme will be confirmed if creditors holding a combined 75 percent of the company's total debt agree to it, the report notes. STX Offshore and two other units of the STX Group had voluntarily sought debt rescheduling with their creditors, Bloomberg News reported. STX Pan Ocean sought court receivership after Korea Development Bank, the main creditor and Pan Ocean's second-biggest shareholder, decided against buying the company from STX Group, Bloomberg News reported. STX Group -- with businesses ranging from shipbuilding to components that go into vessels -- is the largest shareholder of Seoul-based Pan Ocean. The parent has been trying to raise KRW2.5 trillion (US$2.2 billion) by selling stakes in units as a slump in bulk shipping rates caused ship orders to tumble, Bloomberg said. =============== S R I L A N K A ================ NATIONAL SAVINGS: Fitch Assigns 'BB-' Issuer Default Ratings ------------------------------------------------------------ Fitch Ratings has assigned Sri Lanka's National Savings Bank (NSB) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of 'BB-' with Stable Outlooks. NSB has also been assigned a Support rating (SR) and Support Rating Floor (SRF) of '3' and 'BB-' respectively, the latter being the same level as the sovereign. The agency has not assigned NSB a Viability Rating as it is viewed as a public-mission bank due to its policy role. Simultaneously, NSB's National Long-Term rating has been affirmed at 'AAA(lka)' with a Stable Outlook. Key Rating Drivers NSB's ratings reflect Fitch's expectation of the government of Sri Lanka's high propensity but moderate ability to provide support to the bank in case of need. The state's high propensity to support NSB stems from the bank's full state ownership, systemic importance and its policy mandate of mobilising retail savings and investing them in government securities. The state's moderate ability to provide timely support to NSB at times of distress is reflected in the 'BB-'/Stable sovereign rating. The ratings also take into consideration preferential state support to NSB in the form of the explicit guarantee on deposits contained in the NSB Act. Fitch is of the view that state support, in case of need, is likely to be for depositors and senior unsecured creditors of NSB to maintain confidence and systemic stability. Rating Sensitivities Any change in Sri Lanka's rating or to the perception of state support to NSB could result in a change in NSB's IDRs and National Ratings. Further, a reduced expectation of state support through, for instance, the removal of preferential support extended to NSB, or a substantial change in its policy role and/or deviation from mandated core activities indicating its reduced importance to the government, could result in a downgrade of NSB's National Rating. The SR and SRF are sensitive to the sovereign's ability and propensity to provide timely support, particularly if the sovereign rating were to change. NSB is bound by the NSB Act No.30 of 1971 to invest a minimum of 60% of its deposits in government securities. Historically, holdings of government securities have exceeded this threshold (76% on average from 2008-2012). In total, NSB's exposure to the state and state owned entities (SOE) through investments in government securities, loans and equity investments accounted for 71% of assets at end -2012. Such high exposure has supported NSB's local regulatory capital adequacy ratios although absolute capitalisation remains thin. Loans accounted for 27% of NSB's assets at end-2012. Its loan book comprised mostly pawning (gold-backed) advances (36%), housing loans (30%), and loans granted against deposits (12%). Deposits accounted for 88% of NSB's funding at end-2012. The majority of deposits are time deposits resulting in high funding costs as it is not permitted to accept demand deposits as a licensed specialised bank. NSB ranked as the third- largest bank in the system in deposits and the fourth-largest in assets at end -2012. It was established through the amalgamation of the Ceylon Savings Bank, the Ceylon Post Office Savings Bank and the National Savings Movement. NSB has an extensive footprint across Sri Lanka, including 219 branches and 4,053 post offices and sub-post offices at end-2012. A full list of NSB's ratings: Long-Term Foreign- and Local-Currency IDRs assigned at 'BB-'; Stable Outlook Short-term Foreign Currency IDR assigned at 'B' Support Rating assigned at '3' Support Rating Floor assigned at 'BB-' National Long-Term Rating affirmed at 'AAA(lka)'; Stable Outlook =============== X X X X X X X X =============== * Asia-Pacific Country Ratings to Remain Stable Says Moody's ------------------------------------------------------------ Moody's Investors Service says that the sovereign ratings in Asia- Pacific will remain largely stable despite China's slowdown, continuing global headwinds, and the volatility in global capital markets. The steadiness in the outlook for sovereign credit in the region is further in line with Moody's conclusion that the outlook for global economic growth has also not changed significantly since Moody's published its Asia-Pacific 2013 Sovereign Outlook in January. As before, support for the Asia-Pacific growth outlook is coming from the moderate pace of recovery in the US and the sturdy economic and fiscal fundamentals of most countries in the region. At the same time, the ongoing recession in the euro area still represents a prominent constraint. Moody's conclusions were contained in its Asia Pacific 2013 Sovereign Mid-Year Update. The report is -- Asia-Pacific 2013 Sovereign Mid-Year Update: Broad Regional Stability Amid Continuing External Volatility as its title states -- an update to markets and not a rating action. Sovereigns in the region are likely -- as indicated -- to withstand continued market volatility as key metrics related to growth, fiscal, and external performance remain well-positioned. As a result, Moody's does not see material downward pressures on the 21 of 22 rated sovereigns in the region with stable outlooks. The exception is Pakistan (Caa1) which has a negative outlook. According to the report, although regional economic expansion has moderated since last year, it remains stronger relative to other regions. The report says that the deceleration of the Chinese economy poses downside growth risks for the region, given the country's role as a major source of demand for Asia-Pacific's exports. The extent to which growth slows will in part be determined by policymakers, as China attempts to rein in excessive credit expansion and fundamentally restructure its economy to reduce reliance on investment as a driver of growth. The outlook for the global economy will also weigh on the growth prospects of China's economy, which has a high degree of openness. The report also concludes that governments in the region are seen running relatively tight fiscal policies, or continuing with gradual fiscal consolidation. ********* 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., Washington, D.C., USA. Valerie U. Pascual, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Frauline S. Abangan, and Peter A. Chapman, Editors. Copyright 2013. 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$775 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 215-945-7000 or Nina Novak at 202-241-8200. *** End of Transmission ***