/raid1/www/Hosts/bankrupt/TCRAP

/raid1/www/Hosts/bankrupt/TCRAP_Public/130806.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 Tuesday, August 6, 2013, Vol. 16, No. 154 Headlines A U S T R A L I A ACL BEARING: Government Steps In to Pay Out Workers ALLCO FINANCE: Director Faces Suit Over Breaches of Duties BRENSTEW PTY: BRI Ferrier Appointed as Administrators GUNNS LIMITED: Former Chairman Pleads Guilty to Insider Trading LM INVESTMENT: In Liquidation; Foreign Investors May Get Nothing ORIONSTONE PTY: $200MM Sr. Notes Issue Gets Moody's (P)B3 Rating TOOWOOMBA TELEGRAPH: Closes Doors; More Than 30 Workers Lose Jobs C H I N A CHINA HONGQIAO: Fitch Affirms 'BB' LT Issuer Default Ratings CHINA LESSO: China's Infrastructure Investments a Credit Positive I N D I A BAFNA MOTORS: ICRA Lowers Ratings on INR138.67cr Loans to 'D' BHARATH REDDY: ICRA Assigns 'B+' Ratings to INR5.5cr Loans KANAKADURGA EDUCATIONAL: ICRA Rates INR10cr Term Loan at 'B+' KESHAVA REDDY: ICRA Assigns 'B+' Ratings to INR6.5cr Loans L.S. MILLS: ICRA Upgrades Ratings on INR193.42cr Loans From 'B-' MAHANANDEESWARA EDUCATIONAL: ICRA Rates INR23.30cr Loan at 'B+' POONA DISTRICT: ICRA Places 'BB+' Rating on INR81cr Loan SANT FOODS: ICRA Reaffirms 'B' Rating on INR17cr Loans SARASWATHI EDUCATIONAL: ICRA Rates INR6.6cr Term Loan at 'B+' SATYANARAYANA SWAMY: ICRA Rates INR8.85cr Term Loan at 'B+' SURYA EDUCATIONAL: ICRA Places 'B+' Rating on INR8.85cr Term Loan SWARAJ SYNTEX: ICRA Keeps Ratings on INR11.27cr Loans at 'D' VIGNAN VIDYALAYAS: ICRA Assigns 'B' Ratings to INR17.03cr Loans I N D O N E S I A MEDIA NUSANTARA: First Half Results Support Moody's Ba3 Rating MNC SKY VISION: First Half Results Support Moody's B2 Rating J A P A N SONY CORP: Core Electronics Business Remains Fragile, Fitch Says N E W Z E A L A N D ROSS ASSET: David Ross Case Adjourned Until February Next Year P H I L I P P I N E S CHINA BANKING: Fitch Affirms Long-Term IDRs at 'BB' RIZAL COMMERCIAL: Fitch Upgrades Issuer Default Ratings to 'BB' SECURITY BANK: Fitch Affirms Long-Term IDRs at 'BB' UNION BANK: Fitch Affirms Issuer Default Ratings at 'BB-' X X X X X X X X * BOND PRICING: For the Week July 29 to August 2, 2013 - - - - - ================= A U S T R A L I A ================= ACL BEARING: Government Steps In to Pay Out Workers --------------------------------------------------- ABC News reports that millions of dollars in taxpayers money will be needed to pay redundant workers at a failed Launceston car parts manufacturer. ACL Bearing will close in May next year after its receivers were unable to sell the business, according to ABC News. The report notes that the company received AUS2 million from the Commonwealth and AUS330,000 from the State Government four years ago when it went into receivership. The report relates that the Deputy Premier Bryan Green says it does not have to be repaid. "At that stage when we put funds in, it was to assist employees through the redundancies that occurred at that time given that the company couldn't come up with the money to assist those employees," the report quoted Mr. Green as saying. ABC News discloses that the Commonwealth will pay another AUS10 million in entitlements for 136 workers when the business winds up. ALLCO FINANCE: Director Faces Suit Over Breaches of Duties ---------------------------------------------------------- Business Spectator, citing The Australian Financial Review, reports that Allco Finance Group director Gordon Fell faces a lawsuit brought forward by Allco's receivers, Ferrier Hodgson, for damages and breaches of director duties. The report says Ferrier Hodgson accuses Mr. Fell of hiding information from Allco shareholders when the company agreed to buy the Rubicon funds business in December 2007. According to the report, AFR said Mr. Fell was a director of both firms at the time, and made about AUD28.5 million from the deal. The AFR added that Ferrier Hodgson accused Mr. Fell of contravening sections of the Corporations Act relating to care and diligence and good faith and alleges that information relating to Rubicon's financial position was not shared with Allco's shareholders, Business Spectator relays. About Allco Finance Allco Finance Group Ltd. is an integrated global financial services business, specializing in asset origination, funds creation and funds management. The company is a fund manager of alternative assets in its core asset classes, which include aviation, rail, shipping, infrastructure, property, private equity and financial assets. Its primary focus is on commercial property, predominately completed office buildings and select development opportunities. It also purchases new and existing commercial passenger and cargo aircraft for lease to commercial airlines. * * * As reported in the Troubled Company Reporter-Asia Pacific on Nov. 6, 2008, Allco Finance Group appointed Tony McGrath and Joseph Hayes of McGrathNicol as the voluntary administrators of the company and certain of its subsidiaries. Subsequent to the appointment of administrators to Allco, the company's banking syndicate appointed Steve Sherman and Peter Gothard of Ferrier Hodgson as receivers. Allco has more than AUD1 billion in total debt. BRENSTEW PTY: BRI Ferrier Appointed as Administrators ----------------------------------------------------- Yolanda Redrup at SmartCompany reports that fashion retail firm Brenstew Pty Ltd has collapsed, with administrators saying tough trading conditions and a poorly-timed expansion are to blame. Paul Burges -- paul.burges@briferriernsw.com.au -- and Peter Krejci -- peter.krejci@briferriernsw.com.au -- of BRI Ferrier were appointed to the company last in July. Brenstew, which currently trades in five retail outlets located in Dubbo, Tamworth, and Armidale under the brands Blowes Menswear, The Wardrobe and URXs, had administrators appointed last month. The company turns over more than AUD6 million annually, the report discloses. The collapse is just one of many in the fashion industry over the past few years, which has suffered from poor consumer confidence and lower margins, the report relays. Mr. Burges told SmartCompany the businesses are just one half of the Blowes family retail business and the others will remain unaffected. "The business does have its origins back in 1936, but 14 years ago two branches of the Blowes family split," the report quotes Mr. Burges as saying. "They also had operations in Port Macquarie and Chatswood, but we took immediate steps to close these because they were a drain on resources." SmartCompany adds that Mr. Burges said the company's decision to expand to Port Macquarie was "untimely" and was a "drain on company resources" at a time the business couldn't afford it. The administrator would not reveal the company's debt level or its major creditors, the report notes. Mr. Burges said since entering voluntary administration trade has been "pleasing", giving hope to a possible sale of the business, SmartCompany reports. Expressions of interest are now being sought by August 6 for the company and its assets, which include modern leased premises, online stores and integrate online inventory and SEO software and experienced long-term staff. Brenstew Pty Ltd is a family-owned retail fashion business in rural New South Wales founded in 1936. GUNNS LIMITED: Former Chairman Pleads Guilty to Insider Trading --------------------------------------------------------------- Former Gunns Limited chairman, John Eugene Gay has pleaded guilty to insider trading. Mr. Gay, who was a director of Gunns Limited from 1980 to 2010 and was chairman of Gunns Limited from 2002 to 2010, was charged in December 2011. On December 2 and 4, 2009, while in possession of inside information relating to the financial performance of Gunns, Mr. Gay sold more than 3.4 million Gunns shares. This trading was prior to the release of Gunns' half year results on 22 February 2010. Following this release, the Gunns share price fell substantially. The matter will return to the Supreme Court of Tasmania in Launceston on 14 August 2013 for sentencing submissions. ASIC has no further comment on the matter at this time. The Commonwealth Director of Public Prosecutions is prosecuting the matter. Mr. Gay's offending occurred when the maximum penalty for insider trading was imprisonment for 5 years and/or a fine of $220,000. Since then, the maximum penalty has been increased to imprisonment for 10 years and/or a fine of $765,000 or three times the total benefit derived from the offence (whichever is greater). About Gunns Limited Based in Launceston, Australia, Gunns Limited (ASX:GNS) -- http://www.gunns.com.au/-- was an hardwood and softwood forest products company. It operated within three segments: Forest products, Timber products and Other activities. Gunns has about 645 employees in Tasmania, Victoria, South Australia and Western Australia. On Sept. 25, 2012, the directors of Gunns Limited and its 35 entities, and the responsible entity of Gunns Plantations Limited appointed Ian Carson, Daniel Bryant and Craig Crosbie of PPB Advisory as Voluntary Administrators. KordaMentha has also been appointed Receivers and Managers. The appointment came after Gunns failed to secure an equity investor amid high debt and a prolonged trading halt, The Australian reported. LM INVESTMENT: In Liquidation; Foreign Investors May Get Nothing ---------------------------------------------------------------- Jenny Rogers at goldcoast.com.au reports that LM Investment Management Limited has been placed in liquidation and will be wound up, but overseas investors who poured AUD400 million into just one of the company's seven funds fear they will never see their money. According to the report, a Dubai-based lawyer representing overseas investors said the collapse of the company cast serious doubts on Australia's reputation as a safe haven for investment. goldcoast.com.au relates that Brendan Moloney slammed the lack of oversight of the mortgage fund empire headed by former Kiwi Peter Drake which, liquidators say, now has a book value of just AUD7.934 million. Mr. Moloney, who attended a creditors meeting on August 1 on behalf of investors in Hong Kong, Japan, Thailand and the Middle East, said LM's collapse should send a warning to "the highest levels of government in Australia," according to goldcoast.com.au. "This should be of concern at Prime Minister and Leader of the Opposition level. You are looking at a AUD400 million hole that has been allowed to occur with foreign investors' money," the report quotes Mr. Moloney as saying. "That, we feel, will have a long-term effect on the reputation of Australia as a safe haven to invest." goldcoast.com.au say investors in the frozen Managed Performance Fund, now being liquidated by KordaMentha, have been warned the return on their investment is "likely minimal and may be nil". Ginette Muller, of FTI Consulting who, with partner John Park, was appointed liquidator of LM Investment Management Limited on August 1, said she hoped creditors would be able to recoup something from LM's other funds. New Zealand Herald reported that voluntary administrators have been appointed to LM Investment Management, a beleaguered Australian firm that controlled a frozen mortage fund which New Zealanders had more than NZ$100 million tied up in. LM directors on March 19, 2013, appointed John Park and Ginette Muller of FTI Consulting as voluntary administrators, blaming the move on liquidity problems caused by a smear campaign. LM is the responsible entity of these registered managed investment schemes: -- LM Cash Performance Fund; -- LM First Mortgage Income Fund; -- LM Currency Protected Australian Income Fund; -- LM Institutional Currency Protected Australian Income Fund; -- LM Australian Income; -- LM Australian Structured Products Fund; and -- The Australian Retirement Living Fund. LM also operates the unregistered LM Managed Performance Fund. The Supreme Court of Queensland in April appointed KordaMentha and its affiliate firm Calibre Capital as joint trustees of the AUD350 million Gold Coast-based LM Managed Performance Fund (LMPF). ORIONSTONE PTY: $200MM Sr. Notes Issue Gets Moody's (P)B3 Rating ---------------------------------------------------------------- Moody's Investors Service has assigned a provisional Corporate Family Rating of (P)B3 to Orionstone Pty Ltd, an Australian-based privately owned equipment hire specialist. At the same time, Moody's has also assigned a provisional (P)B3 rating to the proposed $200 million Senior Secured notes due 2020. This is the first time that Moody's has assigned ratings to Orionstone. The outlook on the ratings is stable. The assignment of a provisional CFR and Senior Secured ratings are subject to review of final documentation, and successful close of the transaction. The proceeds of the transactions will be used to refinance existing debt, working capital requirements and general corporate purposes. The ratings could be withdrawn if the proposed debt issuance does not proceed as planned. Ratings Rationale: "Orionstone's (P)B3 rating primarily reflects the company's small scale and limited track record of operations under its current form" says Matthew Moore, a Moody's Vice President -- Senior Analyst. "The rating also reflects the company's limited diversity and direct link to the mining industry, which is experiencing significant volatility", Moore adds. "These challenges are counterbalanced by the company's strong margins and variable cost structure, which help insulate earnings during times of weaker utilization" says Moore, adding "The rating is further supported by the company's large and young equipment fleet, and the near term revenue visibility provided by its contracting structure" Orionstone has moderate financial leverage at its rating level, supporting its ability to manage volatility in the end markets the company services. Moody's expects credit metrics to remain at adequate levels for the rating under Moody's base case assumptions, with Debt-to-EBITDA projected to be around 3.5 - 4.0x and EBIT-to-Interest around 1.5 - 2.0x. The provisional rating for the senior secured notes is at the same as the corporate family rating. The proposed capital structure will be made up entirely of pari passu senior secured debt. As part of the transaction, the company will also be entering into an AUD25 million senior secured revolving credit facility. "The rating outlook is stable reflecting our expectation that Orionstone's contracted positions and potential new contracts should allow the company to maintain an adequate financial profile for the current rating." Says Moore, adding "the stable outlook also reflects the company's adequate liquidity profile, which -- upon completion of the debt issuance -- benefits from Moody's expectation for small free cash flow generation, no refinancing requirement, and the availability of revolving facility of around AUD25 million. The rating could be upgraded if Orionstone is able to execute on its growth plans while sustaining utilization rates near historic levels, such that key credit metrics of Debt-to-EBITDA and EBIT- to-Interest are sustained below 3.5x and above 2.0x respectively. The rating could be downgraded if market conditions deteriorate further causing utilization to drop and be sustained below 60% and margins contract materially. Specifically, the rating could be downgraded if the company experiences persistent negative free cash flow generation and/or credit metrics deteriorate such the Debt-to-EBITDA increase above 5.0x and EBIT-Interest drops below 1.25x. The principal methodology used in this rating was the Global Equipment and Automobile Rental Industry Methodology published in December 2010. Orionstone Pty Ltd. is predominantly a heavy earthmoving equipment hire businesses in Australia. The company rents equipment largely to the mining, major infrastructure and oil and gas sectors across Australia. The company generated total revenue of AUD131.8 million and AUD127.2 million in FY13 and FY12, respectively and generated EBITDA of AUD60.0 million and AUD70.2 million. TOOWOOMBA TELEGRAPH: Closes Doors; More Than 30 Workers Lose Jobs ----------------------------------------------------------------- The Queensland Times reports that the Toowoomba Telegraph newspaper will close after confirming it would not be able to trade through liquidation. Some staff cleaned out their desks before a meeting with representatives from liquidator BRI Ferrier on July 31, the report relays. The report notes that the liquidator was appointed to the Telegraph's parent company Queensland Media Holdings earlier this month. Principal Moira Carter said Queensland Media Holdings' Mackay and Toowoomba telegraphs would not be published going forward, according to the report. "The director (of Queensland Media Holdings) was anticipating obtaining sufficient funds from third parties to enable him to propose a Deed of Company Arrangement to his creditors," the report quotes Ms. Carter as saying. "He has not been successful in obtaining the funding." Ms. Carter said the funds also required to provide cash flow for the continued operations of the company were not forthcoming, the report adds. "This is not a decision made lightly by us, as it places in excess of 30 people out of work," the report quotes Ms. Carter as saying. "Former staff will have access to the Government Employee Scheme for any entitlements due to them." ========= C H I N A ========= CHINA HONGQIAO: Fitch Affirms 'BB' LT Issuer Default Ratings ------------------------------------------------------------ Fitch Ratings has revised aluminium manufacturer China Hongqiao Group Limited's Outlook to Stable from Positive. Its Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) and senior unsecured rating have been affirmed at 'BB', respectively. The Outlook change reflects a lower likelihood of an improvement in Hongqiao's credit metrics following its plan for higher capex and sustained lower-than-expected aluminium prices. Hongqiao's Stable Outlook is supported by its cost advantages and strong business position in Shandong province. KEY RATING DRIVERS Weaker profitability: Fitch expects aluminium prices to remain soft but stable for H213. Hongqiao's EBITDAR/tonne softened to CNY5,140/tonne in 2012 (2011: CNY5,752/tonne) as slower economic growth and overcapacity in the industry dragged down aluminium selling prices. Fitch expects Hongqiao's EBITDAR/tonne to likely narrow to below CNY4,500/tonne as China's aluminium prices had been trending down to around CNY12,000 for H113. Higher budgeted capex: Fitch estimates Hongqiao's funds from operations (FFO)-adjusted net leverage to peak at 2.5x (2012: 0.99x) in 2013 and expects meaningful deleveraging to only materialise from 2015 onwards as capex tapers off. Hongqiao's budgeted capex of CNY18bn for the next two years is mainly to increase its primary aluminium capacity, hot rolling facilities and to further enhance its electricity and alumina self- sufficiency. Strong cost competitiveness: Hongqiao's integrated operating model enables it to achieve lower production costs than its competitors. Its self-sufficiency ratio for its key production inputs - alumina and electricity - was above 50% for H113 and is on track to hit 70% by end- 2013. This enabled Hongqiao to maintain its EBITDAR margin at 37.8% for 2012 (2011: 38.6%) despite significantly weaker average selling prices. Fitch expects Hongqiao's EBITDAR margin to remain around 34% for the medium term as cost enhancement initiatives partially absorb the negative impact from the decline in aluminium prices in 2013. Bauxite supply uncertainty: The threat of an export ban in Indonesia on bauxite - a key input of alumina - from 2014 onwards has raised uncertainties as Indonesia is a key bauxite supplier to China. To moderate this risk, Hongqiao has invested in a joint- venture to set up an alumina plant in Indonesia and, in return, is in the midst of obtaining a permit for bauxite export quota. The ban, if takes effect in 2014, may increase input costs for alumina as producers may seek bauxite supply from India or Australia, which has higher logistics costs. Geographical and customer concentration: Hongqiao's customer base is concentrated in Shandong province and its two largest customers collectively contributed 50% of its sales in 2012 (2011: 46%). Such high concentration is a constraint on its ratings. Limited liquidity: Hongqiao's cash balances (end-2012: CNY9.2bn) and unutilised bank facilities (end-2012: CNY7.2bn) would cover the repayment of short-term bank loans (end-2012: CNY6.7bn). The company's budgeted CNY12bn capex in 2013 would be funded from internal cash as well as from its CNY5bn onshore borrowings raised in H113. RATING SENSITIVITIES Negative: Future developments that may, individually or collectively, lead to negative rating action include: -- Deterioration in Hongqiao's leading market position in Zouping and Shandong -- FFO adjusted net leverage above 2.5x on a sustained basis -- EBITDAR/tonne below CNY3,000 on a sustained basis -- Continuous bauxite supply disruption Positive: Future developments that may, individually or collectively, leads to positive rating action include: -- FFO adjusted net leverage below 1.0x on a sustained basis -- EBITDAR/tonne above CNY4,500 on a sustained basis -- Securing a steady long-term bauxite supply CHINA LESSO: China's Infrastructure Investments a Credit Positive ----------------------------------------------------------------- Moody's Investors Service says that the Chinese government's focus on strengthening the country's infrastructure development is credit positive for China Lesso Group Holdings Limited, and supports its Ba2 rating and stable outlook. On July 31, 2013, China's General Office of the State Council said that the central government will strengthen its urban infrastructure development by: 1) improving urban underground piping networks for water supply; 2) upgrading sewage and household-waste treatment facilities; 3) renovating and upgrading heating systems and gas pipes; 4) improving the infrastructure for subways, light railways and other major forms of public transport; 5) upgrading the power grid network; and 6) enhancing urban drainage systems. "Any increase in government spending in the [these] areas is likely to boost demand for China Lesso's products," says Franco Leung, a Moody's Assistant Vice President and Analyst. The company's products fall into the following categories: water supply (39.7% of 2012 revenue), drainage (37.7%), gas supply (1.3%), power supply and telecoms (17.9%) and others (3.4%). "Such a wide range of product offerings and the high concentration in water supply and drainage systems are positive for China Lesso's business growth, as three of the government's six focus areas are related to these segments," Leung adds. In addition, the company's products can be used for underground power supply for railway systems and certain types of gas pipes, areas that could benefit from any increase in the government's investment. China Lesso also has geographically diversified operations, and which will allow it to capture demand in various cities in China and to lower transportation costs. It has 14 production facilities across 11 provinces with designed production capacity of 1.75 million tons per annum in 2012. Given these strengths and its better quality of service, China Lesso is more favorably positioned to benefit from the government's infrastructure spending than its domestic peers, which mostly specialize in limited industry segments or are regionally focused. The principal methodology used in this rating was Global Building Materials Industry Methodology published in July 2009. Founded in 1996 and listed on the Hong Kong Stock Exchange in June 2010, China Lesso Group Holdings Ltd is one of the largest plastic pipe and pipe-fitting manufacturers in China. The company's products are widely used in seven major areas, namely water supply, drainage, power supply and telecommunications, gas supply, agriculture, floor heating and fire prevention. ========= I N D I A ========= BAFNA MOTORS: ICRA Lowers Ratings on INR138.67cr Loans to 'D' ------------------------------------------------------------- ICRA has revised the long-term rating of '[ICRA]B+' to '[ICRA]D' for INR8.67 Crore (revised from INR35.00 Crore) term loan and INR130.00 Crore (enhanced from INR35.00 Crore) Fund Based Facility of Bafna Motors (Mumbai) Private Limited. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Term Loan 8.67 [ICRA]D (revised) Fund Based Limits 130.00 [ICRA]D (revised) The revision in rating factors in instances of delay in repayment for its inventory funding facility reflecting stretched liquidity position, given overall challenging market conditions for commercial vehicle segment, as indicated by falling margins along with demand slowdown. Further to this extension of loans and advances, to its group concerns has also led to further stress on cash flow position for the company. ICRA also notes that capital structure for the company remains highly adverse, given its low net-worth base and high borrowing levels on account of working capital requirements as well as term loans for capex on showrooms. The rating however continues to favorably factor in the promoters' long experience in the vehicle dealership business and dominant market share in the Mumbai & suburban region as a dealer of Tata Motors Limited's commercial vehicles (CV). Bafna Motors (Mumbai) Pvt. Ltd. is an authorized dealer of Tata Motors Ltd., dealing in Commercial Vehicles & Spare Parts and Servicing of Commercial Vehicles. The company serves three regions Mumbai, Thane and Raigad District. The Company was established on 5th November' 2001. The registered office of the company is located at World Trade Centre, Cuffe Parade, Mumbai. The Bafna group was promoted by Mr. M.C.Bafna, with first dealership in Nanded. BMMPL reported a net profit of INR7.97 Crore on an operating income of INR936.66 Crore for 2011-12. BHARATH REDDY: ICRA Assigns 'B+' Ratings to INR5.5cr Loans ---------------------------------------------------------- ICRA has assigned a long-term rating of '[ICRA]B+' to the INR5.50 crore fund based facilities of Bharath Reddy Educational Society. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Fund based limits- 5.30 [ICRA]B+ Assigned Term Loan Proposed limits 0.20 [ICRA]B+ Assigned ICRA has taken a consolidated view of Keshava Reddy group of educational institutions(KREI) including Bharath Reddy Educational Society (BRES-I), Keshava Educational Society (KES-II), Keshava Reddy Educational Trust (KRET-III), Sri Kanakadurga Educational Society (SKES-IV), Sri Keshava Reddy Educational Society (SKRES- V), Sri Mahanandeeswara Educational Society (SMES-VI), Sri Saraswathi Educational Society (SSES-VII), Sri Satyanarayana Swamy Educational Society (SSSES-VIII), Sri Surya Educational Society (SSES-IX) and Sri Venkateswara Educational Society (SVES-X). The operations of these societies are similar with strong operational and financial linkages in the form of fund flow. The assigned rating is constrained by the highly competitive school education segment in Andhra Pradesh with corresponding challenges in attracting students, increasing per student fee and recruitment/retention of quality faculty along with the regulatory challenges involved in the education sector. The rating of BRES is further constrained by the short duration (four years) of operation of its school, low net worth and the highly leveraged capital structure which is expected to deteriorate further with the planned debt funded capex of Rs 2 crore for classroom addition in FY14. The rating is also constrained by the stretched cash flow situation of KREI group due to the aggressive capex being undertaken for starting new campuses and the highly leveraged capital structure of the group which restricts financial flexibility. Going forward, due to the lumpy nature of cash flows and the continuous capital expenditure being undertaken by the group, it will be critical to prudently manage the cash flows in order to avoid any liquidity mismatch and to ensure regular debt servicing. The assigned rating however draws comfort from the significant experience of over two and a half decades of the promoters in imparting school education and the strong brand image of the group with the newly started schools gaining good acceptance. The rating also favorably factors in the healthy growth in operating income of KREI in the last 5 years backed by increasing enrolments & year-on-year fee revision. Company Profile Bharath Reddy Educational Society was established in 2009 and currently runs one school in Mahboobnagar, Andhra Pradesh. BRES-I is part of Keshava Reddy group of educational institutions which was started in the year 1993 with 196 students by Mr. N. Keshava Reddy. For the first 15 years of operation the group ran it's schools only in Kurnool, AP but since 2008 the group has been undertaking major expansion and has spread across several locations in Andhra Pradesh. The group presently has close to 100,000 students studying in 38 schools under the guidance of ~5000 teachers in 14 different locations in Andhra Pradesh. The school imparts education from KG to class X as per the Andhra Pradesh state curriculum. Recent Results In FY13, BRES-I had an excess of income over expenditure of INR0.64 crore (un-audited & provisional) on an operating income of INR6.32 crore (un-audited and provisional). KANAKADURGA EDUCATIONAL: ICRA Rates INR10cr Term Loan at 'B+' ------------------------------------------------------------- ICRA has assigned a long-term rating of '[ICRA]B+' to the INR10.00 crore fund based facilities of Sri Kanakadurga Educational Society. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Fund based limits- 10.00 [ICRA]B+ Assigned Term Loan ICRA has taken a consolidated view of Keshava Reddy group of educational institutions(KREI) including Bharath Reddy Educational Society (BRES-I), Keshava Educational Society (KES-II), Keshava Reddy Educational Trust (KRET-III), Sri Kanakadurga Educational Society (SKES-IV), Sri Keshava Reddy Educational Society (SKRES- V), Sri Mahanandeeswara Educational Society (SMES-VI), Sri Saraswathi Educational Society (SSES-VII), Sri Satyanarayana Swamy Educational Society (SSSES-VIII), Sri Surya Educational Society (SSES-IX) and Sri Venkateswara Educational Society (SVES-X). The operations of these societies are similar with strong operational and financial linkages in the form of fund flow. The assigned rating is constrained by the highly competitive school education segment in Andhra Pradesh with corresponding challenges in attracting students, increasing per student fee and recruitment/retention of quality faculty along with the regulatory challenges involved in the education sector. The rating of SKES is further constrained by the short duration (three years) of operation of its school, low net worth and the highly leveraged capital structure resulting in weak debt service coverage indicators. The rating is also constrained by the stretched cash flow situation of KREI group due to the aggressive capex being undertaken for starting new campuses and the highly leveraged capital structure of the group which restricts financial flexibility. Going forward, due to the lumpy nature of cash flows and the continuous capital expenditure being undertaken by the group, prudent management of the cash flows will be critical in order to avoid any liquidity mismatch and to ensure regular debt servicing. The assigned rating however draws comfort from the significant experience of over two and a half decades of the promoters in imparting school education and the strong brand image of the group with the newly started schools gaining good acceptance. The rating also favorably factors in the healthy growth in operating income of KREI in the last 5 years backed by increasing enrolments & year-on-year fee revision. Sri Kanakadurga Educational Society was established in 2009 and currently runs one school in Guntur, Andhra Pradesh. SKES-IV is part of Keshava Reddy group of educational institutions which was started in the year 1993 with 196 students by Mr. N. Keshava Reddy. For the first 15 years of operation the group ran it's schools only in Kurnool, AP but since 2008 the group has been undertaking major expansion and has spread across several locations in Andhra Pradesh. The group presently has close to 100,000 students studying in 38 schools under the guidance of ~5000 teachers in 14 different locations in Andhra Pradesh. The school imparts education from KG to class X as per the Andhra Pradesh state curriculum. Recent Results In FY13, SKES-IV had an excess of income over expenditure of INR0.35 crore (un-audited & provisional) on an operating income of INR3.70 crore (un-audited and provisional). KESHAVA REDDY: ICRA Assigns 'B+' Ratings to INR6.5cr Loans ---------------------------------------------------------- ICRA has assigned a long-term rating of '[ICRA]B+' to the INR6.50 crore fund based facilities of Keshava Reddy Educational Trust. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Fund based limits- 3.00 [ICRA]B+ Assigned Term Loan Fund based limits- 3.50 [ICRA]B+ Assigned Overdraft ICRA has taken a consolidated view of Keshava Reddy group of educational institutions(KREI) including Bharath Reddy Educational Society (BRES-I), Keshava Educational Society (KES-II), Keshava Reddy Educational Trust (KRET-III), Sri Kanakadurga Educational Society (SKES-IV), Sri Keshava Reddy Educational Society (SKRES- V), Sri Mahanandeeswara Educational Society (SMES-VI), Sri Saraswathi Educational Society (SSES-VII), Sri Satyanarayana Swamy Educational Society (SSSES-VIII), Sri Surya Educational Society (SSES-IX) and Sri Venkateswara Educational Society (SVES-X). The operations of these societies are similar with strong operational and financial linkages in the form of fund flow. The assigned rating is constrained by the highly competitive school education segment in Andhra Pradesh with corresponding challenges in attracting students, increasing per student fee and recruitment/retention of quality faculty along with the regulatory challenges involved in the education sector. The rating is also constrained by the stretched cash flow situation of KREI group due to the aggressive capex being undertaken for starting new campuses and the highly leveraged capital structure of the group which restricts financial flexibility. Going forward, due to the lumpy nature of cash flows and the continuous capital expenditure being undertaken by the group, prudent management of the cash flows will be critical in order to avoid any liquidity mismatch and to ensure regular debt servicing. The assigned rating however draws comfort from the significant experience of over two and a half decades of the promoters in imparting school education and the strong brand image of the group with the newly started schools gaining good acceptance. The rating also favorably factors in the healthy growth in operating income of KREI in the last 5 years backed by increasing enrolments & year-on-year fee revision. The rating of KRET also positively factors in the established presence of KRET schools of over 5 years, low outstanding debt and comfortable coverage indicators. However ICRA negatively factors in the diversion of cash surpluses from KRET in order to support the weaker group entities. Company Profile Keshava Reddy Educational Trust was established in 2007 and currently runs two schools in Anantapur, Andhra Pradesh. KRET- III is part of Keshava Reddy group of educational institutions which was started in the year 1993 with 196 students by Mr. N. Keshava Reddy. For the first 15 years of operation the group ran it's schools only in Kurnool, AP but since 2008 the group has been undertaking major expansion and has spread across several locations in Andhra Pradesh. The group presently has close to 100,000 students studying in 38 schools under the guidance of ~5000 teachers in 14 different locations in Andhra Pradesh. The school imparts education from KG to class X as per the Andhra Pradesh state curriculum. Recent Results In FY13, KRET-III had an excess of income over expenditure of INR0.45 crore (un-audited & provisional) on an operating income of INR13.34 crore (un-audited and provisional). L.S. MILLS: ICRA Upgrades Ratings on INR193.42cr Loans From 'B-' ---------------------------------------------------------------- ICRA has upgraded the long term rating outstanding on INR138.42 crore term loan facility and INR55.00 crore fund based facilities of LS Mills Limited from '[ICRA]B-' to '[ICRA]B'. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Term Loans 138.42 Upgraded from [ICRA]B- to [ICRA]B Long term fund 55.00 Upgraded from [ICRA]B- to based facilities [ICRA]B The rating revision is on account of continued improvement in the scale and margins of the Company in Q1 2013-14, mainly on the back of sales promotion and marketing efforts of the company towards the home textile segment sales. ICRA also takes into account the established track record of the promoters in the textile industry, established client relationships and benefits from its integrated manufacturing set up with presence across the value chain. However, the rating remains constrained on account of the Company's highly leveraged capital structure owing to debt availed in the past for capital expenditure, high working capital requirement and low accruals in the last few years. The rating also factors in the limited pricing flexibility in the business owing to competition and exposure of earnings to fluctuations witnessed in raw material prices and exchange rates. The Company had to undergo restructuring under the CDR mechanism in 2009-10, owing to high debt levels, weak accruals and significant derivative losses. Under the scheme, the Company benefited from lower interest rates and extended repayment tenure and the promoters had to bring in additional capital, which they did during 2010-11. The Company currently remains under the purview of CDR scheme and with high debt repayment obligations falling due in the medium term, the Company's liquidity position remains vulnerable and any slowdown in demand or steep movement in raw material prices could adversely impact the Company's credit profile. Incorporated in 1983 by Mr. L Sundarrajan, L.S. Mills Limited is an integrated textile player with moderate scale of operations. The company manufactures cotton yarn, fabrics and home furnishing products. LSML has an installed capacity of 133,672 spindles, 720 rotors, 60 looms, and 141 sewing machines at Theni (Tamil Nadu). The company primarily manufactures fine count cotton yarn, grey fabric and fine thread count bed linen and other home furnishing products. The company derives majority of export revenues from the home furnishing made-ups segment, with high concentration in US market. Recent Results As per the provisional and unaudited results for Q1 2013-14, the company had achieved sales of INR109.2 crore and profit before tax of INR11.5 crore, compared to sales and PBT of INR91.7 crore and INR8.4 crore during the same period in preceding fiscal. The Company has achieved sales of INR434.1 crore and profit before tax of INR24.0 crore in fiscal 2012-13. MAHANANDEESWARA EDUCATIONAL: ICRA Rates INR23.30cr Loan at 'B+' --------------------------------------------------------------- ICRA has assigned a long-term rating of '[ICRA]B+' to the INR23.30 crore fund based facilities of Sri Mahanandeeswara Educational Society. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Fund based limits- 23.30 [ICRA]B+ Assigned Term Loan ICRA has taken a consolidated view of Keshava Reddy group of educational institutions(KREI) including Bharath Reddy Educational Society (BRES-I), Keshava Educational Society (KES-II), Keshava Reddy Educational Trust (KRET-III), Sri Kanakadurga Educational Society (SKES-IV), Sri Keshava Reddy Educational Society (SKRES- V), Sri Mahanandeeswara Educational Society (SMES-VI), Sri Saraswathi Educational Society (SSES-VII), Sri Satyanarayana Swamy Educational Society (SSSES-VIII), Sri Surya Educational Society (SSES-IX) and Sri Venkateswara Educational Society (SVES-X). The operations of these societies are similar with strong operational and financial linkages in the form of fund flow. The assigned rating is constrained by the highly competitive school education segment in Andhra Pradesh with corresponding challenges in attracting students, increasing per student fee and recruitment/retention of quality faculty along with the regulatory challenges involved in the education sector. ICRA also negatively factors in the largely debt funded capex of Rs 16.5 crore incurred in FY13 in order to start a new residential school in Vikarabad, AP that has adversely impacted the capital structure and coverage ratios of the society. The rating is also constrained by the stretched cash flow situation of KREI group due to the aggressive capex being undertaken for starting new campuses and the highly leveraged capital structure of the group which restricts financial flexibility. Going forward, due to the lumpy nature of cash flows and the continuous capital expenditure being undertaken by the group, prudent management of the cash flows will be critical in order to avoid any liquidity mismatch and to ensure regular debt servicing. The assigned rating however draws comfort from the significant experience of over two and a half decades of the promoters in imparting school education and the strong brand image of the group with the newly started schools gaining good acceptance. The rating also favorably factors in the healthy growth in operating income of KREI in the last 5 years backed by increasing enrolments & year-on-year fee revision. Sri Mahanandeeswara Educational Society was established in 2008 and currently runs three schools in Kurnool and one school in Hyderabad. SMES-VI is part of Keshava Reddy group of educational institutions which was started in the year 1993 with 196 students by Mr. N. Keshava Reddy. For the first 15 years of operation the group ran it's schools only in Kurnool, AP but since 2008 the group has been undertaking major expansion and has spread across several locations in Andhra Pradesh. The group presently has close to 100,000 students studying in 38 schools under the guidance of ~5000 teachers in 14 different locations in Andhra Pradesh. The school imparts education from KG to class X as per the Andhra Pradesh state curriculum. Recent Results In FY13, SMES-VI had an excess of income over expenditure of INR0.29 crore (un-audited & provisional) on an operating income of INR9.94 crore (un-audited and provisional). POONA DISTRICT: ICRA Places 'BB+' Rating on INR81cr Loan -------------------------------------------------------- ICRA has assigned the '[ICRA]BB+' rating to the INR81.00 crore cash credit facility of The Poona District Police Co-operative Credit Society Limited. The outlook on the long-term rating is Stable. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Long term, Cash 81.00 [ICRA]BB+ (Stable) Assigned Credit Facility The assigned rating favourably factors in the long track record of operations, substantial quantum of capital raised on the back of steady expansion of the membership base, streamlined recovery of advances from the district's Police Department among other recovery avenues minimising the possibility of loan defaults and the exemption from income tax which lends support to the society's earnings profile. The ratings however are moderated by the constrained financial flexibility owing to limited access to funds; limited fund management experience of the managing committee coupled with the absence of regulatory supervision. ICRA also takes note of the principal objective of the society to grant hassle free loans to its members over profit maximising. The Poona District Police Co-operative Credit Society Limited was established in 1920 by the employees of the Pune district's Police Department. The society operates for the mutual benefit of its members by granting hassle free loans. PDPC has built a membership base of ~12,000 with a loan portfolio of -INR170 crore as on FY 13 end. The society is managed by a committee headed by the Deputy and Assistant commissioners of the police department. SANT FOODS: ICRA Reaffirms 'B' Rating on INR17cr Loans ------------------------------------------------------ ICRA has revoked the suspension and reaffirmed the '[ICRA]B' rating to the INR17.00 crore fund based facilities of Sant Foods Private Limited. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Fund Based limits 17.00 [ICRA]B (reaffirmed) The rating is constrained by SFPL's muted growth in operating income on account of low orders intake from Middle East Countries, its weak financial profile as reflected by low profitability metrics, high gearing and consequently weak debt coverage indicators coupled with high working capital requirements. The rating also takes into account high intensity of competition in the industry and agro climatic risks, which can affect the availability of paddy in adverse weather conditions. The rating, however favorably takes into account long standing experience of promoters in rice industry and the proximity of the mill to major rice growing area which results in easy availability of paddy. Sant Foods Private Limited was established in the year 2008. The Company is primarily engaged in the milling of rice with an installed capacity of 6 tons per hour. The company has 2 sortex machines with the capacity of 5 tons/hour and 2 tons/hour. The company is professionally is managed by the directors of the company. Out of 4 directors 3 have vast experience in the rice industry. Recent Results During the financial year 2012-13, the Company reported a profit after tax (PAT) of INR0.19 crore on an operating income of INR40.09 crore as against PAT of INR0.09 crore on an operating income of INR40.08 crore in FY12. SARASWATHI EDUCATIONAL: ICRA Rates INR6.6cr Term Loan at 'B+' ------------------------------------------------------------- ICRA has assigned a long-term rating of '[ICRA]B+' to the INR6.60 crore fund based facilities of Sri Saraswathi Educational Society. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Fund based limits- 6.60 [ICRA]B+ Assigned Term Loan ICRA has taken a consolidated view of Keshava Reddy group of educational institutions(KREI) including Bharath Reddy Educational Society (BRES-I), Keshava Educational Society (KES-II), Keshava Reddy Educational Trust (KRET-III), Sri Kanakadurga Educational Society (SKES-IV), Sri Keshava Reddy Educational Society (SKRES- V), Sri Mahanandeeswara Educational Society (SMES-VI), Sri Saraswathi Educational Society (SSES-VII), Sri Satyanarayana Swamy Educational Society (SSSES-VIII), Sri Surya Educational Society (SSES-IX) and Sri Venkateswara Educational Society (SVES-X). The operations of these societies are similar with strong operational and financial linkages in the form of fund flow. The assigned rating is constrained by the highly competitive school education segment in Andhra Pradesh with corresponding challenges in attracting students, increasing per student fee and recruitment/retention of quality faculty along with the regulatory challenges involved in the education sector. The rating of SSES- VII is further constrained by the short duration (four years) of operation of its schools, drop in profitability in FY13, low net worth and the highly leveraged capital structure, which is expected to deteriorate further with the planned debt funded capex of INR10 crore for starting new campus in Tirupathi, AP in FY14. The rating is also constrained by the stretched cash flow situation of KREI group due to the aggressive capex being undertaken for starting new campuses and the highly leveraged capital structure of the group which restricts financial flexibility. Going forward, due to the lumpy nature of cash flows and the continuous capital expenditure being undertaken by the group, prudent management of the cash flows will be critical in order to avoid any liquidity mismatch and to ensure regular debt servicing. The assigned rating however draws comfort from the significant experience of over two and a half decades of the promoters in imparting school education and the strong brand image of the group with the newly started schools gaining good acceptance. The rating also favorably factors in the healthy growth in operating income of KREI in the last 5 years backed by increasing enrolments & year-on-year fee revision. Sri Saraswathi Educational Society was established in 2009 and currently runs three schools in Kurnool, Andhra Pradesh. SSES-VII is part of Keshava Reddy group of educational institutions which was started in the year 1993 with 196 students by Mr. N. Keshava Reddy. For the first 15 years of operation the group ran it's schools only in Kurnool, AP but since 2008 the group has been undertaking major expansion and has spread across several locations in Andhra Pradesh. The group presently has close to 100,000 students studying in 38 schools under the guidance of ~5000 teachers in 14 different locations in Andhra Pradesh. The school imparts education from KG to class X as per the Andhra Pradesh state curriculum. Recent Results In FY13, SSES-VII had an excess of income over expenditure of INR0.39 crore (un-audited & provisional) on an operating income of INR6.52 crore (un-audited and provisional). SATYANARAYANA SWAMY: ICRA Rates INR8.85cr Term Loan at 'B+' ----------------------------------------------------------- ICRA has assigned a long-term rating of '[ICRA]B+' to the INR8.85 crore fund based facilities of Sri Satyanarayana Swamy Educational Society. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Fund based limits- 8.85 [ICRA]B+ Assigned Term Loan ICRA has taken a consolidated view of Keshava Reddy group of educational institutions(KREI) including Bharath Reddy Educational Society (BRES-I), Keshava Educational Society (KES-II), Keshava Reddy Educational Trust (KRET-III), Sri Kanakadurga Educational Society (SKES-IV), Sri Keshava Reddy Educational Society (SKRES- V), Sri Mahanandeeswara Educational Society (SMES-VI), Sri Saraswathi Educational Society (SSES-VII), Sri Satyanarayana Swamy Educational Society (SSSES-VIII), Sri Surya Educational Society (SSES-IX) and Sri Venkateswara Educational Society (SVES-X). The operations of these societies are similar with strong operational and financial linkages in the form of fund flow. The assigned rating is constrained by the highly competitive school education segment in Andhra Pradesh with corresponding challenges in attracting students, increasing per student fee and recruitment/retention of quality faculty along with the regulatory challenges involved in the education sector. The rating of SSSES is further constrained by the short duration (three years) of operation of its school, low net worth and the highly leveraged capital structure resulting in weak debt service coverage indicators. The rating is also constrained by the stretched cash flow situation of KREI group due to the aggressive capex being undertaken for starting new campuses and the highly leveraged capital structure of the group which restricts financial flexibility. Going forward, due to the lumpy nature of cash flows and the continuous capital expenditure being undertaken by the group, prudent management of the cash flows will be critical in order to avoid any liquidity mismatch and to ensure regular debt servicing. The assigned rating however draws comfort from the significant experience of over two and a half decades of the promoters in imparting school education and the strong brand image of the group with the newly started schools gaining good acceptance. The rating also favorably factors in the healthy growth in operating income of KREI in the last 5 years backed by increasing enrolments & year-on-year fee revision. Sri Satyanarayana Swamy Educational Society was established in 2009 and currently runs two schools in Medak, Andhra Pradesh. SSSES-VIII is part of Keshava Reddy group of educational institutions which was started in the year 1993 with 196 students by Mr. N. Keshava Reddy. For the first 15 years of operation the group ran it's schools only in Kurnool, AP but since 2008 the group has been undertaking major expansion and has spread across several locations in Andhra Pradesh. The group presently has close to 100,000 students studying in 38 schools under the guidance of ~5000 teachers in 14 different locations in Andhra Pradesh. The school imparts education from KG to class X as per the Andhra Pradesh state curriculum. Recent Results In FY13, SSSES-VIII had an excess of income over expenditure of INR0.95 crore (un-audited & provisional) on an operating income of INR6.58 crore (un-audited and provisional). SURYA EDUCATIONAL: ICRA Places 'B+' Rating on INR8.85cr Term Loan ----------------------------------------------------------------- ICRA has assigned a long-term rating of '[ICRA]B+' to the INR8.85 crore fund based facilities of Sri Surya Educational Society. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Fund based limits- 8.85 [ICRA]B+ Assigned Term Loan ICRA has taken a consolidated view of Keshava Reddy group of educational institutions(KREI) including Bharath Reddy Educational Society (BRES-I), Keshava Educational Society (KES-II), Keshava Reddy Educational Trust (KRET-III), Sri Kanakadurga Educational Society (SKES-IV), Sri Keshava Reddy Educational Society (SKRES- V), Sri Mahanandeeswara Educational Society (SMES-VI), Sri Saraswathi Educational Society (SSES-VII), Sri Satyanarayana Swamy Educational Society (SSSES-VIII), Sri Surya Educational Society (SSES-IX) and Sri Venkateswara Educational Society (SVES-X). The operations of these societies are similar with strong operational and financial linkages in the form of fund flow. The assigned rating is constrained by the highly competitive school education segment in Andhra Pradesh with corresponding challenges in attracting students, increasing per student fee and recruitment/retention of quality faculty along with the regulatory challenges involved in the education sector. The ratings of SSES- IX are further constrained by the short duration (three years) of operation of its schools, low net worth and the highly leveraged capital structure. However with the healthy profitability and in the absence of any major capex the debt servicing for SSES-IX is expected to be comfortable. The rating is also constrained by the stretched cash flow situation of KREI group due to the aggressive capex being undertaken for starting new campuses and the highly leveraged capital structure of the group which restricts financial flexibility. Going forward, due to the lumpy nature of cash flows and the continuous capital expenditure being undertaken by the group, prudent management of the cash flows will be critical in order to avoid any liquidity mismatch and to ensure regular debt servicing. The assigned rating however draws comfort from the significant experience of over two and a half decades of the promoters in imparting school education and the strong brand image of the group with the newly started schools gaining good acceptance. The rating also favorably factors in the healthy growth in operating income of KREI in the last 5 years backed by increasing enrolments & year-on-year fee revision. Company Profile Sri Surya Educational Society was established in 2010 and currently runs three schools in Srikakulam and one school in Rajahmundry, Andhra Pradesh. SSES- IX is part of Keshava Reddy group of educational institutions which was started in the year 1993 with 196 students by Mr. N. Keshava Reddy. For the first 15 years of operation the group ran it's schools only in Kurnool, AP but since 2008 the group has been undertaking major expansion and has spread across several locations in Andhra Pradesh. The group presently has close to 100,000 students studying in 38 schools under the guidance of ~5000 teachers in 14 different locations in Andhra Pradesh. The school imparts education from KG to class X as per the Andhra Pradesh state curriculum. Recent Results In FY13, SSES-IX had an excess of income over expenditure of INR2.08 crore (un-audited & provisional) on an operating income of INR14.24 crore (un-audited and provisional). SWARAJ SYNTEX: ICRA Keeps Ratings on INR11.27cr Loans at 'D' ------------------------------------------------------------ ICRA has retained the long term rating of '[ICRA]D' to INR7.93 crore (reduced from INR8.77 crore) fund based Limits of 'Swaraj Syntex Private Limited. ICRA has also retained long term and short term rating of [ICRA]D assigned to INR3.34 crore (enhanced from INR2.50 crore) unallocated limits of the company. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Fund based Limits 7.93 [ICRA]D (Retained) Unallocated Limits 3.34 [ICRA]D (Retained) The assigned rating continue to reflect the stretched liquidity position as reflected in instances of working capital limits overutilization and delays in debt servicing by the company. The ratings also factor in the high financial risk profile of the company characterized by thin profit margins and weak debt coverage indicators. ICRA further takes a note on company's exposure to highly competitive market due to presence of large number of players and vulnerability to raw material price fluctuations which in turn exerts pressure on profit margins of the company. However, the assigned rating favorably factors in long standing experience of the promoters along with operational synergy achieved by the company through its group company in similar line of business. The ratings further factors in the locational advantage of the company arising from close proximity to raw material sourcing as well as its customers. Swaraj Syntex Pvt. Ltd was incorporated in August 1991 with the main objective of manufacturing and trading of finished fabrics and also to engage in embroidery works. The company has its registered office and manufacturing unit situated in Surat. Gradually as the business operations turned univiable leading to decline in sales and profit margins, owing to highly competitive market, the company decided to cease all previous operations and commenced dyeing of grey fabrics on job work basis since 2012. Recent updates: 'Swaraj Syntex Private Limited' has reported a net profit of INR0.07 crore on an operating income of INR24.13 crore for the year ending 31st March, 2013 as per provisional figures However, the assigned rating favorably factors in long standing experience of the promoters along with operational synergy achieved by the company through its group company in similar line of business. The ratings further factors in the locational advantage of the company arising from close proximity to raw material sourcing as well as its customers. About the Company: 'Swaraj Syntex Pvt. Ltd '(SSPL) was incorporated in August 1991 with the main objective of manufacturing and trading of finished fabrics and also to engage in embroidery works. The company has its registered office and manufacturing unit situated in Surat. Gradually as the business operations turned univiable leading to decline in sales and profit margins, owing to highly competitive market, the company decided to cease all previous operations and commenced dyeing of grey fabrics on job work basis since 2012. Swaraj Syntex Private Limited has reported a net profit of INR0.07 crore on an operating income of INR24.13 crore for the year ending March 31, 2013 as per provisional figures VIGNAN VIDYALAYAS: ICRA Assigns 'B' Ratings to INR17.03cr Loans --------------------------------------------------------------- ICRA has assigned a long-term rating of '[ICRA]B' to the INR17.03 crore fund based facilities of Vignan Vidyalayas Limited. Amount Facilities (INR Cr) Ratings ---------- -------- ------- Fund based limits- 1.97 [ICRA]B Assigned Overdraft Fund based limits- 15.06 [ICRA]B Assigned Term Loan The assigned rating is constrained by the 10% year on year drop in number of students availing the hostel facilities of VVL due to the drop in enrollments in schools and junior colleges of the parent society (LES) where higher number of students avail the hostel facilities leading to stagnant Operating incomes over the last six years. The growth of the parent society, to which VVL provides hostel and mess facilities exclusively has been largely through engineering and technical education where the hostel enrollments are lower. The ratings are further constrained by the sharp drop in the operating profit margin from 36.6% in FY12 to 27.0% in FY13 due to the higher raw material and building maintenance costs and the weak debt protection indicators given the considerable scheduled debt repayments in the next 2-3 years. However the ratings draw comfort from the long experience of over three decades of the promoters in the field of education and the established presence of the group's institutions. Company Profile Vignan Vidyalayas Limited was incorporated in 1993 as a limited company by Dr. Lavu Rathaiah and family. The company provides hostel and mess facilities exclusively for the students enrolled under Lavu Education Society (LES) apart from leasing buildings to schools and junior colleges of LES in Hyderabad and Vizag. In FY12, VVL reported an operating income of INR11.85 crore with a net profit of INR1.02 crore. Recent Results (Provisional) In FY13, the company reported a profit before tax of INR0.71 crore (un-audited & provisional) on an operating income of INR11.38 crore (un-audited and provisional). ================= I N D O N E S I A ================= MEDIA NUSANTARA: First Half Results Support Moody's Ba3 Rating -------------------------------------------------------------- Moody's Investors Service says that the operating results of PT Media Nusantara Citra Tbk (MNC) for 1H 2013 were broadly in line with expectations, and continue to support its Ba3 rating and stable outlook. MNC's 1H 2013 revenue grew 3% year-on-year, while its unadjusted EBITDA rose by 15%, owing to the 9% growth in advertising revenue and an increase in its share of prime-time audience. "MNC has maintained its leading position in Indonesia's growing free-to-air (FTA) TV market, with a local prime-time audience share of about 43% compared with 35% at end-2012," says Annalisa Di Chiara, a Moody's Vice President and Senior Analyst. "Moreover, the company's unadjusted EBITDA margin improved to 41% for 1H 2013 from 34% for 1H 2012, mainly because of lower programming costs. It also continues to develop its own content, thereby lowering expenses related to acquiring content from third parties and in turn improving its profitability," she adds. Furthermore, MNC's liquidity position is strong, with cash funds and time deposits of about IDR3.2 trillion compared with IDR2.8 trillion at end-2012. Its unadjusted debt balance also decreased to IDR610 billion from IDR727 billion over the same period. While MNC's dividend payout is likely to be around 50%, Moody's believes that such a ratio is manageable for the company, given its low debt, modest capex and solid cash flow profile. The stable rating outlook reflects Moody's expectation that MNC will maintain its competitive position in Indonesia's FTA TV market and keep its EBITDA margins above 30%. Moody's also expects the company to achieve sustainable earnings growth and cash flow generation over the short- to medium-term, supported by its leading market position and its strong line-up of content. The principal methodology used in this rating was the Global Broadcast and Advertising Related Industries Industry Methodology published in May 2012. PT Media Nusantara Citra Tbk, headquartered in Jakarta, is an integrated media company with television, radio, print media, content production and distribution, and wireless value-added services operations. It is the market leader in Indonesia's FTA TV industry, and owns three of the 11 FTA TV networks nationwide. PT Global Mediacom Tbk owns approximately 64.84% of MNC. MNC SKY VISION: First Half Results Support Moody's B2 Rating ------------------------------------------------------------ Moody's Investors Service says that the operating results of MNC Sky Vision for 1H 2013 were broadly in line with expectations, and continue to support its B2 rating and positive outlook. MNC Sky Vision's revenue for 1H 2013 grew 31% year-on-year and its unadjusted EBITDA increased by 30%, owing to strong subscriber growth of 43% and stable average revenue per user (ARPU) of IDR118,000 per month. "The company's subscribers surpassed 2 million for the first time, reflecting its solid organic growth and the underpenetrated Pay TV market in Indonesia," says Annalisa Di Chiara, a Moody's Vice President and Senior Analyst. In addition, MNC Sky Vision's unadjusted EBITDA margin for 2Q 2013 improved to 41% from 38% in 1Q 2013. Moody's expects the company to maintain EBITDA margin at above 40% over the next two years. On the other hand, Moody's also expects the company to generate negative free cash flow for full-year 2013 owing to its high capex requirements to support subscriber growth. Moreover, MNC Sky Vision does not maintain any long-term undrawn credit facilities -- a credit negative -- and will therefore need to rely on external financing to support this growth. It had IDR 125million of cash on its balance sheet as of June 30, 2013. "Nonetheless, we note that PT Global Mediacom Tbk, MNC Sky Vision's majority shareholder, has a solid liquidity position and has the ability to provide support to the company in case of need," Di Chiara says. The positive rating outlook reflects Moody's expectation that MNC Sky Vision's leading market share and product offerings will continue to support significant organic growth over the next 12-18 months, and help keep EBITDA margins above 40%. The principal methodology used in this rating/analysis was the Global Pay Television - Cable and Direct-to-Home Satellite Operators Industry Methodology published in April 2013. Headquartered in Jakarta, MNC Sky Vision is a provider of direct- to-home, Pay TV services. The company is 66% owned by PT Global Mediacom Tbk, a diversified media company, and in which PT Bhakti Investama Tbk owns a 53.4% stake. Both Global Mediacom and Bhakti Investama are publicly listed in Indonesia. ========= J A P A N ========= SONY CORP: Core Electronics Business Remains Fragile, Fitch Says ---------------------------------------------------------------- Fitch Ratings says Sony Corporation's (Sony, BB-/Negative) return to profit for the first quarter of the financial year ending March 2014 (FYE14) is a step towards achieving long-term profitability. However, profitability in its core electronics business remains weak and, in Fitch's view, remains fragile to competitive pressure and exchange rate risk. Fitch would look for Sony to reclaim technology leadership in key products, further capitalise on its brand and improve profitability significantly before considering upgrading it to investment-grade. Sony reported an operating EBIT of JPY37bn in Q1 FYE14. However, excluding Sony Financial Holdings, exceptional gains and favourable exchange rate impact, Sony would have recorded an operating loss of JPY36bn, compared with a loss of JPY42bn during the same period last year. The weaker yen alone bolstered Sony's electronics revenue and operating EBIT by JPY191bn and JPY19bn respectively in Q1 FYE14. The Japanese yen depreciated by 19%-20% yoy against the US dollar and the euro. The weakening of the yen has been positive for Sony, particularly for its electronics and entertainment businesses in developed markets. However, the company also expects a negative foreign exchange impact of JPY20bn on EBIT in FYE14, due to emerging market currencies falling against the US dollar since June 2013, which may wipe out the foreign exchange benefit seen in Q1 FYE14. Profitability of the electronics business remains weak. Although Sony turned around the electronics business in Q1 FYE14 with an EBIT of JPY13bn, this was mainly driven by the yen depreciation and also the reclassification of JPY10bn expenses to corporate overheads. Sony achieved some success in its Xperia smartphones and LCD TVs, but it still lags in several areas, such as digital cameras, games, PCs and other audio and video products. It pared its FYE14 electronics business operating profit target of JPY100bn to below JPY90bn. Fitch believes that Sony would benefit from an increased focus on improving the core electronics business. However, the proposal to spin off a small minority of Sony's entertainment business will neither tighten the group's strategic focus nor provide sufficient impetus to transform the electronics business. A partial spin-off would generate capital to pay down debt or invest in new products, but minority dividends would leak from the group's future cash flows. Credit investors have benefitted from the relatively stable cash flows generated by these operations. ==================== N E W Z E A L A N D ==================== ROSS ASSET: David Ross Case Adjourned Until February Next Year -------------------------------------------------------------- Hamish Mcnicol at Stuff.co.nz reports that the untested Financial Advisers Disciplinary Committee remains just that after proceedings against alleged NZ$400 million Ponzi scheme operator David Ross were adjourned until next year. Mr. Ross' case was the first of four financial advisers due to be heard by the committee in the next fortnight, but the hearing was adjourned to February 1, Stuff.co.nz relates. This was due to the current criminal proceedings laid against Mr. Ross, the report says. According to the report, Mr. Ross appeared in the Wellington District Court last month on five charges brought by the Serious Fraud Office and three from the Financial Markets Authority. He was remanded without plea until August 22 following his appearance, the report notes. Monday's [August 5] hearing was the first of the disciplinary committee, which was established by the commerce minister in 2010. According to Stuff.co.nz, Mr. Ross was referred to the committee by the FMA after complaints from the public and the authority's own monitoring. If he was found to have breached the financial advisers code of conduct he could be fined up to NZ$10,000 and face deregistration, Stuff.co.nz relays. Mr. Ross has, however, already been suspended as an adviser by the FMA. Stuff.co.nz notes that the disciplinary body is headed by former Court of Appeal judge Sir Bruce Robertson. He adjourned Monday's hearing pending determination of the matters before the criminal court, the report adds. As reported in the Troubled Company Reporter-Asia Pacific on Nov. 8, 2012, the High Court appointed PricewaterhouseCoopers partners John Fisk and David Bridgman as Receivers and Managers to Ross Asset Management Limited and nine other associated entities following application by the Financial Markets Authority. The associated entities are: * Bevis Marks Corporation Limited; * Dagger Nominees Limited; * McIntosh Asset Management Limited; * Mercury Asset Management Limited; * Ross Investment Management Limited; * Ross Unit Trusts Management Limited; * United Asset Management Limited; * Chapman Ross Trust; * Woburn Ross Trust; * Ace Investments Limited or Ace Investment Trust Limited or Ace Investment Trust; * Vivian Investments Limited; and * Ross Units Trusts Limited. The Receivers and Managers have also been appointed to Wellington investment adviser David Robert Gilmore Ross personally. Mr. Fisk said they have identified investments of nearly NZ$450 million held on behalf of more than 900 investors across 1,720 individual accounts. The High Court in mid-December ordered John Fisk and David Bridgman be appointed liquidators of these companies: -- Ross Asset Management Limited (In Receivership); -- Bevis Marks Corporation Limited (In Receivership); -- McIntosh Asset Management Limited (In Receivership); and -- Mercury Asset Management Limited (In Receivership). ===================== P H I L I P P I N E S ===================== CHINA BANKING: Fitch Affirms Long-Term IDRs at 'BB' --------------------------------------------------- Fitch Ratings has upgraded Rizal Commercial Banking Corp.'s (RCBC) Long-Term Issuer Default Ratings (IDRs) to 'BB' from 'BB-' and its Viability Rating (VR) to 'bb' from 'bb-'. The Outlook is Stable. At the same time, the agency has revised Union Bank of the Philippines' (UnionBank) Outlook to Positive from Stable and affirmed its IDRs at 'BB-' and VR at 'bb-'. Fitch has also affirmed the ratings of another two Philippine banks -- China Banking Corporation (China Bank) and Security Bank Corporation (Security Bank) -- including their Long-Term IDRs at 'BB' and VR at 'bb'. Their Outlooks are Stable. Key Rating Drivers - VRs, IDRs and National Ratings The VRs and IDRs, as well as the National Ratings of the four Philippine banks reflect their strong core capitalisation, improving loan loss reserves, as well as their sound funding, liquidity and domestic franchises as medium-sized players. These strengths are moderated, to varying degrees, by longstanding issues faced by all four banks (also characteristic of many other major domestic players), including large loan concentration, foreclosed properties with modest reserves, developing corporate governance standards, and the presence of families as controlling shareholders. The positive rating actions on RCBC and UnionBank are driven by their reduced burden of legacy non-performing assets (NPAs) and rising loss-absorption buffers in recent years. They also reflect Fitch's expectations that their financial metrics will become comparable with the industry. The upgrade of RCBC also takes into account the already positive impact on its credit profile from several initiatives, including fresh capital and bulk NPA sales in H113. UnionBank's Positive Outlook reflects Fitch's view that benign domestic operating conditions and ongoing recovery efforts should over time support its ability to manage down its NPAs to a level more comparable with higher-rated domestic peers. The Stable Outlooks on China Bank, Security Bank and RCBC reflect Fitch's expectation that they will largely maintain steady credit profiles over the near- to medium-term, underpinned by a buoyant domestic economy, manageable corporate leverage and low interest rates. Lending activities and fee-based income growth are backed by domestic demand, with rising overseas remittances and business process outsourcing countering the fragile global economy. This backdrop, alongside strong foreign inflows, is likely to increase credit activities (especially in property lending) and asset prices in the Philippines. However, based on Fitch's own stress- testing, most major Philippine banks are in a reasonably strong position to weather deterioration in the operating environment, due to their sound funding and loss-absorption capacities. Moreover, recent records of the domestic regulator suggest that prudential measures may be implemented to counter potential macroeconomic shocks, such as from corporate leverage and sector concentration. Key Rating Drivers - Support Ratings (SRs) and Support Rating Floors (SRFs) The SRs and SRFs of the four Philippine banks are the same at '3' and 'BB-', respectively, reflecting Fitch's view of a moderate probability of extraordinary state support available to them, if needed. The banks each have a 3%-5% market share of domestic banking assets, and hence are of moderate systemic importance to the country relative to their larger peers. Key Rating Drivers - Debt Ratings RCBC's senior notes have been upgraded to 'BB', in line with Fitch's action on its IDR. This is because the notes constitute direct, unsubordinated and senior unsecured obligations of the bank, and rank equally with all its other unsecured and unsubordinated obligations. RCBC's perpetual hybrid notes have been upgraded to 'B' to maintain the three-notch differential with the bank's 'bb' VR, reflecting the presence of both subordination and going-concern loss-absorption mechanisms. The local-currency subordinated notes of Security Bank and UnionBank are rated one notch below their VR-driven National Long- Term Ratings, to reflect the subordination status and absence of going-concern loss-absorption features. Rating Sensitivities - VRs, IDRs and National Ratings Further diversity and stability in funding, loans and revenue bases arising from disciplined expansion and a more established franchise, together with continued strong core capitalisation, sustained risk-adjusted profitability and improvements in asset quality, would be rating-positive for all four Philippine banks. An additional upgrade consideration for UnionBank is reduced property risk, given that foreclosed properties represent the bulk of its NPAs and are subject to valuation fluctuations as a result of the fair-value accounting method. But upside rating potential may be undermined by any further build-up of risks, such as from brisk property lending growth, rapidly rising corporate leverage and household debt in the Philippines. The VRs could come under pressure should the banks' loss- absorption capacities weaken significantly in the face of event risks such as sizeable takeovers, excessive growth or a material increase in risk appetite, including increasing concentration of exposures and unseasoned portfolios. Such a scenario would also be negative for the IDRs of China Bank, RCBC and Security Bank. It would, however, be neutral for UnionBank's IDRs, which are at the same level as its SRF. Rating Sensitivities - SRs and SRFs A change in the government's ability to provide extraordinary support would affect the SRs and SRFs. This could stem from a change in the sovereign ratings, although this seems highly unlikely in the near term considering the recent upgrade of, and Stable Outlook on, the Philippines' sovereign ratings (see related rating action commentary dated 27 March 2013 at www.fitchratings.com). The SRs and SRFs will also be impacted by any change in the government's willingness to extend timely support. One development that could lead to this adverse outcome, for instance, is global initiatives to reduce implicit state support available to banks, and Fitch views this to be a long-term risk for the Philippines. Rating Sensitivities - Debt Ratings A change in RCBC's IDR and VR will affect the ratings on its senior notes and perpetual hybrid notes, respectively. The ratings on the subordinated notes of Security Bank and UnionBank are ultimately sensitive to a change in the banks' respective VRs. The list of rating actions is as follows: China Bank -- Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB'; Outlook Stable -- National Long-Term Rating affirmed at 'AA-(phl)'; Outlook Stable -- Viability Rating affirmed at 'bb' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' Security Bank -- Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB'; Outlook Stable -- Short-Term Foreign-Currency IDR affirmed at 'B' -- National Long-Term Rating affirmed at 'AA-(phl)'; Outlook Stable -- Viability Rating affirmed at 'bb' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' -- Ratings on subordinated notes affirmed at 'A+(phl)' RCBC -- Long-Term Foreign- and Local-Currency IDRs upgraded to 'BB' from 'BB-'; Outlook Stable -- Viability Rating upgraded to 'bb' from 'bb-' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' -- Ratings on senior notes upgraded to 'BB' from 'BB-' -- Ratings on perpetual callable subordinated hybrid notes upgraded to 'B' from 'B-' UnionBank -- Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB-'; Outlook revised to Positive from Stable -- National Long-Term Rating affirmed at 'A+(phl)'; Outlook revised to Positive from Stable -- Viability Rating affirmed at 'bb-' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' -- Ratings on subordinated notes affirmed at 'A (phl)' RIZAL COMMERCIAL: Fitch Upgrades Issuer Default Ratings to 'BB' --------------------------------------------------------------- Fitch Ratings has upgraded Rizal Commercial Banking Corp.'s (RCBC) Long-Term Issuer Default Ratings (IDRs) to 'BB' from 'BB-' and its Viability Rating (VR) to 'bb' from 'bb-'. The Outlook is Stable. At the same time, the agency has revised Union Bank of the Philippines' (UnionBank) Outlook to Positive from Stable and affirmed its IDRs at 'BB-' and VR at 'bb-'. Fitch has also affirmed the ratings of another two Philippine banks -- China Banking Corporation (China Bank) and Security Bank Corporation (Security Bank) -- including their Long-Term IDRs at 'BB' and VR at 'bb'. Their Outlooks are Stable. Key Rating Drivers - VRs, IDRs and National Ratings The VRs and IDRs, as well as the National Ratings of the four Philippine banks reflect their strong core capitalisation, improving loan loss reserves, as well as their sound funding, liquidity and domestic franchises as medium-sized players. These strengths are moderated, to varying degrees, by longstanding issues faced by all four banks (also characteristic of many other major domestic players), including large loan concentration, foreclosed properties with modest reserves, developing corporate governance standards, and the presence of families as controlling shareholders. The positive rating actions on RCBC and UnionBank are driven by their reduced burden of legacy non-performing assets (NPAs) and rising loss-absorption buffers in recent years. They also reflect Fitch's expectations that their financial metrics will become comparable with the industry. The upgrade of RCBC also takes into account the already positive impact on its credit profile from several initiatives, including fresh capital and bulk NPA sales in H113. UnionBank's Positive Outlook reflects Fitch's view that benign domestic operating conditions and ongoing recovery efforts should over time support its ability to manage down its NPAs to a level more comparable with higher-rated domestic peers. The Stable Outlooks on China Bank, Security Bank and RCBC reflect Fitch's expectation that they will largely maintain steady credit profiles over the near- to medium-term, underpinned by a buoyant domestic economy, manageable corporate leverage and low interest rates. Lending activities and fee-based income growth are backed by domestic demand, with rising overseas remittances and business process outsourcing countering the fragile global economy. This backdrop, alongside strong foreign inflows, is likely to increase credit activities (especially in property lending) and asset prices in the Philippines. However, based on Fitch's own stress- testing, most major Philippine banks are in a reasonably strong position to weather deterioration in the operating environment, due to their sound funding and loss-absorption capacities. Moreover, recent records of the domestic regulator suggest that prudential measures may be implemented to counter potential macroeconomic shocks, such as from corporate leverage and sector concentration. Key Rating Drivers - Support Ratings (SRs) and Support Rating Floors (SRFs) The SRs and SRFs of the four Philippine banks are the same at '3' and 'BB-', respectively, reflecting Fitch's view of a moderate probability of extraordinary state support available to them, if needed. The banks each have a 3%-5% market share of domestic banking assets, and hence are of moderate systemic importance to the country relative to their larger peers. Key Rating Drivers - Debt Ratings RCBC's senior notes have been upgraded to 'BB', in line with Fitch's action on its IDR. This is because the notes constitute direct, unsubordinated and senior unsecured obligations of the bank, and rank equally with all its other unsecured and unsubordinated obligations. RCBC's perpetual hybrid notes have been upgraded to 'B' to maintain the three-notch differential with the bank's 'bb' VR, reflecting the presence of both subordination and going-concern loss-absorption mechanisms. The local-currency subordinated notes of Security Bank and UnionBank are rated one notch below their VR-driven National Long- Term Ratings, to reflect the subordination status and absence of going-concern loss-absorption features. Rating Sensitivities - VRs, IDRs and National Ratings Further diversity and stability in funding, loans and revenue bases arising from disciplined expansion and a more established franchise, together with continued strong core capitalisation, sustained risk-adjusted profitability and improvements in asset quality, would be rating-positive for all four Philippine banks. An additional upgrade consideration for UnionBank is reduced property risk, given that foreclosed properties represent the bulk of its NPAs and are subject to valuation fluctuations as a result of the fair-value accounting method. But upside rating potential may be undermined by any further build-up of risks, such as from brisk property lending growth, rapidly rising corporate leverage and household debt in the Philippines. The VRs could come under pressure should the banks' loss- absorption capacities weaken significantly in the face of event risks such as sizeable takeovers, excessive growth or a material increase in risk appetite, including increasing concentration of exposures and unseasoned portfolios. Such a scenario would also be negative for the IDRs of China Bank, RCBC and Security Bank. It would, however, be neutral for UnionBank's IDRs, which are at the same level as its SRF. Rating Sensitivities - SRs and SRFs A change in the government's ability to provide extraordinary support would affect the SRs and SRFs. This could stem from a change in the sovereign ratings, although this seems highly unlikely in the near term considering the recent upgrade of, and Stable Outlook on, the Philippines' sovereign ratings (see related rating action commentary dated 27 March 2013 at www.fitchratings.com). The SRs and SRFs will also be impacted by any change in the government's willingness to extend timely support. One development that could lead to this adverse outcome, for instance, is global initiatives to reduce implicit state support available to banks, and Fitch views this to be a long-term risk for the Philippines. Rating Sensitivities - Debt Ratings A change in RCBC's IDR and VR will affect the ratings on its senior notes and perpetual hybrid notes, respectively. The ratings on the subordinated notes of Security Bank and UnionBank are ultimately sensitive to a change in the banks' respective VRs. The list of rating actions is as follows: China Bank -- Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB'; Outlook Stable -- National Long-Term Rating affirmed at 'AA-(phl)'; Outlook Stable -- Viability Rating affirmed at 'bb' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' Security Bank -- Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB'; Outlook Stable -- Short-Term Foreign-Currency IDR affirmed at 'B' -- National Long-Term Rating affirmed at 'AA-(phl)'; Outlook Stable -- Viability Rating affirmed at 'bb' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' -- Ratings on subordinated notes affirmed at 'A+(phl)' RCBC -- Long-Term Foreign- and Local-Currency IDRs upgraded to 'BB' from 'BB-'; Outlook Stable -- Viability Rating upgraded to 'bb' from 'bb-' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' -- Ratings on senior notes upgraded to 'BB' from 'BB-' -- Ratings on perpetual callable subordinated hybrid notes upgraded to 'B' from 'B-' UnionBank -- Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB-'; Outlook revised to Positive from Stable -- National Long-Term Rating affirmed at 'A+(phl)'; Outlook revised to Positive from Stable -- Viability Rating affirmed at 'bb-' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' -- Ratings on subordinated notes affirmed at 'A (phl)' SECURITY BANK: Fitch Affirms Long-Term IDRs at 'BB' --------------------------------------------------- Fitch Ratings has upgraded Rizal Commercial Banking Corp.'s (RCBC) Long-Term Issuer Default Ratings (IDRs) to 'BB' from 'BB-' and its Viability Rating (VR) to 'bb' from 'bb-'. The Outlook is Stable. At the same time, the agency has revised Union Bank of the Philippines' (UnionBank) Outlook to Positive from Stable and affirmed its IDRs at 'BB-' and VR at 'bb-'. Fitch has also affirmed the ratings of another two Philippine banks -- China Banking Corporation (China Bank) and Security Bank Corporation (Security Bank) -- including their Long-Term IDRs at 'BB' and VR at 'bb'. Their Outlooks are Stable. Key Rating Drivers - VRs, IDRs and National Ratings The VRs and IDRs, as well as the National Ratings of the four Philippine banks reflect their strong core capitalisation, improving loan loss reserves, as well as their sound funding, liquidity and domestic franchises as medium-sized players. These strengths are moderated, to varying degrees, by longstanding issues faced by all four banks (also characteristic of many other major domestic players), including large loan concentration, foreclosed properties with modest reserves, developing corporate governance standards, and the presence of families as controlling shareholders. The positive rating actions on RCBC and UnionBank are driven by their reduced burden of legacy non-performing assets (NPAs) and rising loss-absorption buffers in recent years. They also reflect Fitch's expectations that their financial metrics will become comparable with the industry. The upgrade of RCBC also takes into account the already positive impact on its credit profile from several initiatives, including fresh capital and bulk NPA sales in H113. UnionBank's Positive Outlook reflects Fitch's view that benign domestic operating conditions and ongoing recovery efforts should over time support its ability to manage down its NPAs to a level more comparable with higher-rated domestic peers. The Stable Outlooks on China Bank, Security Bank and RCBC reflect Fitch's expectation that they will largely maintain steady credit profiles over the near- to medium-term, underpinned by a buoyant domestic economy, manageable corporate leverage and low interest rates. Lending activities and fee-based income growth are backed by domestic demand, with rising overseas remittances and business process outsourcing countering the fragile global economy. This backdrop, alongside strong foreign inflows, is likely to increase credit activities (especially in property lending) and asset prices in the Philippines. However, based on Fitch's own stress- testing, most major Philippine banks are in a reasonably strong position to weather deterioration in the operating environment, due to their sound funding and loss-absorption capacities. Moreover, recent records of the domestic regulator suggest that prudential measures may be implemented to counter potential macroeconomic shocks, such as from corporate leverage and sector concentration. Key Rating Drivers - Support Ratings (SRs) and Support Rating Floors (SRFs) The SRs and SRFs of the four Philippine banks are the same at '3' and 'BB-', respectively, reflecting Fitch's view of a moderate probability of extraordinary state support available to them, if needed. The banks each have a 3%-5% market share of domestic banking assets, and hence are of moderate systemic importance to the country relative to their larger peers. Key Rating Drivers - Debt Ratings RCBC's senior notes have been upgraded to 'BB', in line with Fitch's action on its IDR. This is because the notes constitute direct, unsubordinated and senior unsecured obligations of the bank, and rank equally with all its other unsecured and unsubordinated obligations. RCBC's perpetual hybrid notes have been upgraded to 'B' to maintain the three-notch differential with the bank's 'bb' VR, reflecting the presence of both subordination and going-concern loss-absorption mechanisms. The local-currency subordinated notes of Security Bank and UnionBank are rated one notch below their VR-driven National Long- Term Ratings, to reflect the subordination status and absence of going-concern loss-absorption features. Rating Sensitivities - VRs, IDRs and National Ratings Further diversity and stability in funding, loans and revenue bases arising from disciplined expansion and a more established franchise, together with continued strong core capitalisation, sustained risk-adjusted profitability and improvements in asset quality, would be rating-positive for all four Philippine banks. An additional upgrade consideration for UnionBank is reduced property risk, given that foreclosed properties represent the bulk of its NPAs and are subject to valuation fluctuations as a result of the fair-value accounting method. But upside rating potential may be undermined by any further build-up of risks, such as from brisk property lending growth, rapidly rising corporate leverage and household debt in the Philippines. The VRs could come under pressure should the banks' loss- absorption capacities weaken significantly in the face of event risks such as sizeable takeovers, excessive growth or a material increase in risk appetite, including increasing concentration of exposures and unseasoned portfolios. Such a scenario would also be negative for the IDRs of China Bank, RCBC and Security Bank. It would, however, be neutral for UnionBank's IDRs, which are at the same level as its SRF. Rating Sensitivities - SRs and SRFs A change in the government's ability to provide extraordinary support would affect the SRs and SRFs. This could stem from a change in the sovereign ratings, although this seems highly unlikely in the near term considering the recent upgrade of, and Stable Outlook on, the Philippines' sovereign ratings (see related rating action commentary dated 27 March 2013 at www.fitchratings.com). The SRs and SRFs will also be impacted by any change in the government's willingness to extend timely support. One development that could lead to this adverse outcome, for instance, is global initiatives to reduce implicit state support available to banks, and Fitch views this to be a long-term risk for the Philippines. Rating Sensitivities - Debt Ratings A change in RCBC's IDR and VR will affect the ratings on its senior notes and perpetual hybrid notes, respectively. The ratings on the subordinated notes of Security Bank and UnionBank are ultimately sensitive to a change in the banks' respective VRs. The list of rating actions is as follows: China Bank -- Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB'; Outlook Stable -- National Long-Term Rating affirmed at 'AA-(phl)'; Outlook Stable -- Viability Rating affirmed at 'bb' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' Security Bank -- Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB'; Outlook Stable -- Short-Term Foreign-Currency IDR affirmed at 'B' -- National Long-Term Rating affirmed at 'AA-(phl)'; Outlook Stable -- Viability Rating affirmed at 'bb' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' -- Ratings on subordinated notes affirmed at 'A+(phl)' RCBC -- Long-Term Foreign- and Local-Currency IDRs upgraded to 'BB' from 'BB-'; Outlook Stable -- Viability Rating upgraded to 'bb' from 'bb-' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' -- Ratings on senior notes upgraded to 'BB' from 'BB-' -- Ratings on perpetual callable subordinated hybrid notes upgraded to 'B' from 'B-' UnionBank -- Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB-'; Outlook revised to Positive from Stable -- National Long-Term Rating affirmed at 'A+(phl)'; Outlook revised to Positive from Stable -- Viability Rating affirmed at 'bb-' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' -- Ratings on subordinated notes affirmed at 'A (phl)' UNION BANK: Fitch Affirms Issuer Default Ratings at 'BB-' --------------------------------------------------------- Fitch Ratings has upgraded Rizal Commercial Banking Corp.'s (RCBC) Long-Term Issuer Default Ratings (IDRs) to 'BB' from 'BB-' and its Viability Rating (VR) to 'bb' from 'bb-'. The Outlook is Stable. At the same time, the agency has revised Union Bank of the Philippines' (UnionBank) Outlook to Positive from Stable and affirmed its IDRs at 'BB-' and VR at 'bb-'. Fitch has also affirmed the ratings of another two Philippine banks -- China Banking Corporation (China Bank) and Security Bank Corporation (Security Bank) -- including their Long-Term IDRs at 'BB' and VR at 'bb'. Their Outlooks are Stable. Key Rating Drivers - VRs, IDRs and National Ratings The VRs and IDRs, as well as the National Ratings of the four Philippine banks reflect their strong core capitalisation, improving loan loss reserves, as well as their sound funding, liquidity and domestic franchises as medium-sized players. These strengths are moderated, to varying degrees, by longstanding issues faced by all four banks (also characteristic of many other major domestic players), including large loan concentration, foreclosed properties with modest reserves, developing corporate governance standards, and the presence of families as controlling shareholders. The positive rating actions on RCBC and UnionBank are driven by their reduced burden of legacy non-performing assets (NPAs) and rising loss-absorption buffers in recent years. They also reflect Fitch's expectations that their financial metrics will become comparable with the industry. The upgrade of RCBC also takes into account the already positive impact on its credit profile from several initiatives, including fresh capital and bulk NPA sales in H113. UnionBank's Positive Outlook reflects Fitch's view that benign domestic operating conditions and ongoing recovery efforts should over time support its ability to manage down its NPAs to a level more comparable with higher-rated domestic peers. The Stable Outlooks on China Bank, Security Bank and RCBC reflect Fitch's expectation that they will largely maintain steady credit profiles over the near- to medium-term, underpinned by a buoyant domestic economy, manageable corporate leverage and low interest rates. Lending activities and fee-based income growth are backed by domestic demand, with rising overseas remittances and business process outsourcing countering the fragile global economy. This backdrop, alongside strong foreign inflows, is likely to increase credit activities (especially in property lending) and asset prices in the Philippines. However, based on Fitch's own stress- testing, most major Philippine banks are in a reasonably strong position to weather deterioration in the operating environment, due to their sound funding and loss-absorption capacities. Moreover, recent records of the domestic regulator suggest that prudential measures may be implemented to counter potential macroeconomic shocks, such as from corporate leverage and sector concentration. Key Rating Drivers - Support Ratings (SRs) and Support Rating Floors (SRFs) The SRs and SRFs of the four Philippine banks are the same at '3' and 'BB-', respectively, reflecting Fitch's view of a moderate probability of extraordinary state support available to them, if needed. The banks each have a 3%-5% market share of domestic banking assets, and hence are of moderate systemic importance to the country relative to their larger peers. Key Rating Drivers - Debt Ratings RCBC's senior notes have been upgraded to 'BB', in line with Fitch's action on its IDR. This is because the notes constitute direct, unsubordinated and senior unsecured obligations of the bank, and rank equally with all its other unsecured and unsubordinated obligations. RCBC's perpetual hybrid notes have been upgraded to 'B' to maintain the three-notch differential with the bank's 'bb' VR, reflecting the presence of both subordination and going-concern loss-absorption mechanisms. The local-currency subordinated notes of Security Bank and UnionBank are rated one notch below their VR-driven National Long- Term Ratings, to reflect the subordination status and absence of going-concern loss-absorption features. Rating Sensitivities - VRs, IDRs and National Ratings Further diversity and stability in funding, loans and revenue bases arising from disciplined expansion and a more established franchise, together with continued strong core capitalisation, sustained risk-adjusted profitability and improvements in asset quality, would be rating-positive for all four Philippine banks. An additional upgrade consideration for UnionBank is reduced property risk, given that foreclosed properties represent the bulk of its NPAs and are subject to valuation fluctuations as a result of the fair-value accounting method. But upside rating potential may be undermined by any further build-up of risks, such as from brisk property lending growth, rapidly rising corporate leverage and household debt in the Philippines. The VRs could come under pressure should the banks' loss- absorption capacities weaken significantly in the face of event risks such as sizeable takeovers, excessive growth or a material increase in risk appetite, including increasing concentration of exposures and unseasoned portfolios. Such a scenario would also be negative for the IDRs of China Bank, RCBC and Security Bank. It would, however, be neutral for UnionBank's IDRs, which are at the same level as its SRF. Rating Sensitivities - SRs and SRFs A change in the government's ability to provide extraordinary support would affect the SRs and SRFs. This could stem from a change in the sovereign ratings, although this seems highly unlikely in the near term considering the recent upgrade of, and Stable Outlook on, the Philippines' sovereign ratings (see related rating action commentary dated 27 March 2013 at www.fitchratings.com). The SRs and SRFs will also be impacted by any change in the government's willingness to extend timely support. One development that could lead to this adverse outcome, for instance, is global initiatives to reduce implicit state support available to banks, and Fitch views this to be a long-term risk for the Philippines. Rating Sensitivities - Debt Ratings A change in RCBC's IDR and VR will affect the ratings on its senior notes and perpetual hybrid notes, respectively. The ratings on the subordinated notes of Security Bank and UnionBank are ultimately sensitive to a change in the banks' respective VRs. The list of rating actions is as follows: China Bank -- Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB'; Outlook Stable -- National Long-Term Rating affirmed at 'AA-(phl)'; Outlook Stable -- Viability Rating affirmed at 'bb' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' Security Bank -- Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB'; Outlook Stable -- Short-Term Foreign-Currency IDR affirmed at 'B' -- National Long-Term Rating affirmed at 'AA-(phl)'; Outlook Stable -- Viability Rating affirmed at 'bb' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' -- Ratings on subordinated notes affirmed at 'A+(phl)' RCBC -- Long-Term Foreign- and Local-Currency IDRs upgraded to 'BB' from 'BB-'; Outlook Stable -- Viability Rating upgraded to 'bb' from 'bb-' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' -- Ratings on senior notes upgraded to 'BB' from 'BB-' -- Ratings on perpetual callable subordinated hybrid notes upgraded to 'B' from 'B-' UnionBank -- Long-Term Foreign- and Local-Currency IDRs affirmed at 'BB-'; Outlook revised to Positive from Stable -- National Long-Term Rating affirmed at 'A+(phl)'; Outlook revised to Positive from Stable -- Viability Rating affirmed at 'bb-' -- Support Rating affirmed at '3' -- Support Rating Floor affirmed at 'BB-' -- Ratings on subordinated notes affirmed at 'A (phl)' =============== X X X X X X X X =============== * BOND PRICING: For the Week July 29 to August 2, 2013 ------------------------------------------------------ Issuer Coupon Maturity Currency Price ------ ------ -------- -------- ----- AUSTRALIA --------- GRIFFIN COAL MINING 9.50 12/1/2016 USD 39.00 GTL INFRASTRUCTURE 2.53 11/9/2017 USD 43.33 MIDWEST VANADIUM 11.50 2/15/2018 USD 63.50 MIDWEST VANADIUM 11.50 2/15/2018 USD 71.21 MIRABELA NICKEL 8.75 4/15/2018 USD 71.50 NEW S WALES TREA 0.50 9/14/2022 AUD 69.50 NEW S WALES TREA 0.50 10/7/2022 AUD 69.28 NEW S WALES TREA 0.50 10/28/2022 AUD 69.07 NEW S WALES TREA 0.50 11/18/2022 AUD 67.82 NEW S WALES TREA 0.50 12/16/2022 AUD 68.00 NEW S WALES TREA 0.50 2/2/2023 AUD 68.37 NEW S WALES TREA 0.50 3/30/2023 AUD 68.13 TREAS CORP VICT 0.50 8/25/2022 AUD 70.52 TREAS CORP VICT 0.50 3/3/2023 AUD 69.23 TREAS CORP VICT 0.50 11/12/2030 AUD 47.89 CHINA ----- CHINA GOVT BOND 1.64 12/15/2033 CNY 68.04 INDIA ----- 3I INFOTECH LTD 5.00 4/26/2017 USD 30.61 COROMANDEL INTL 9.00 7/23/2016 INR 15.29 DR REDDY'S LABOR 9.25 3/24/2014 INR 4.98 JCT LTD 2.50 4/8/2011 USD 20.00 MASCON GLOBAL LT 2.00 12/28/2012 USD 10.00 PRAKASH IND LTD 5.63 10/17/2014 USD 64.69 PRAKASH IND LTD 5.25 4/30/2015 USD 67.33 PUNJAB INFRA DB 0.40 10/15/2024 INR 31.96 PUNJAB INFRA DB 0.40 10/15/2025 INR 28.94 PUNJAB INFRA DB 0.40 10/15/2026 INR 26.20 PUNJAB INFRA DB 0.40 10/15/2027 INR 25.53 PUNJAB INFRA DB 0.40 10/15/2028 INR 26.20 PUNJAB INFRA DB 0.40 10/15/2029 INR 19.38 PUNJAB INFRA DB 0.40 10/15/2030 INR 15.12 PUNJAB INFRA DB 0.40 10/15/2032 INR 16.62 PUNJAB INFRA DB 0.40 10/15/2033 INR 13.91 PYRAMID SAIMIRA 1.75 7/4/2012 USD 1.00 REI AGRO 5.50 11/13/2014 USD 70.31 REI AGRO 5.50 11/13/2014 USD 70.31 SHIV-VANI OIL 5.00 8/17/2015 USD 29.61 SUZLON ENERGY LT 7.50 10/11/2012 USD 65.12 SUZLON ENERGY LT 5.00 4/13/2016 USD 50.33 INDONESIA ---------- BUMI CAPITAL 12.00 11/10/2016 USD 66.00 BUMI INVESTMENT 10.75 10/6/2017 USD 65.50 JAPAN ----- ELPIDA MEMORY 2.03 3/22/2012 JPY 14.62 ELPIDA MEMORY 2.10 11/29/2012 JPY 15.12 ELPIDA MEMORY 2.29 12/7/2012 JPY 14.62 ELPIDA MEMORY 0.50 10/26/2015 JPY 12.62 TOKYO ELECTRIC 2.36 5/28/2040 JPY 71.12 TOKYO ELECTRIC 1.95 7/29/2030 JPY 74.87 PHILIPPINES ----------- BAYAN TELECOMMUN 13.50 7/15/2006 USD 22.75 BAYAN TELECOMMUN 13.50 7/15/2006 USD 22.75 SINGAPORE --------- BAKRIE TELECOM 11.50 5/7/2015 USD 39.00 BAKRIE TELECOM 11.50 5/7/2015 USD 36.16 BLD INVESTMENT 8.63 3/23/2015 USD 63.87 DAVOMAS INTL FIN 11.00 12/8/2014 USD 24.62 DAVOMAS INTL FIN 11.00 12/8/2014 USD 24.62 ENERCOAL RESOURCES 9.25 08/05/2014 USD 70.66 INDO INFRASTRUCT 2.00 7/30/2049 USD 1.87 SOUTH KOREA ----------- EXP-IMP BK KOREA 0.50 9/28/2016 BRL 64.45 EXP-IMP BK KOREA 0.50 10/27/2016 BRL 72.04 EXP-IMP BK KOREA 0.50 11/28/2016 BRL 69.16 EXP-IMP BK KOREA 0.50 12/22/2016 BRL 68.07 EXP-IMP BK KOREA 0.50 10/23/2017 TRY 69.15 EXP-IMP BK KOREA 0.50 11/21/2017 BRL 62.85 EXP-IMP BK KOREA 0.50 12/22/2017 TRY 64.37 EXP-IMP BK KOREA 0.50 1/25/2017 TRY 73.97 OSUNG LST CO LTD 4.00 7/7/2013 USD 27.47 SRI LANKA --------- SRI LANKA GOVT 6.20 8/1/2020 LKR 74.69 SRI LANKA GOVT 7.00 10/1/2023 LKR 67.80 SRI LANKA GOVT 5.35 3/1/2026 LKR 56.67 SRI LANKA GOVT 8.00 1/1/2032 LKR 71.27 THAILAND -------- G STEEL 3.00 10/4/2015 USD 11.25 MDX PUBLIC CO 4.75 9/17/2003 USD 16.00 ********* 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 ***