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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
Thursday, August 22, 2013, Vol. 16, No. 166
Headlines
A U S T R A L I A
ELITE CRANES: Repays AUD67,057 Debt; Staves Off Liquidation
GMK EXPLORATION: Gold Miner Placed in Administration
HS VISION: Directors Confident of Finance Agreement
PAPERLINX LTD: Annual Loss Narrows to AUD90.2MM in 2012/13
TASSAL GROUP: Returns to Business Following Receivership
C H I N A
KAISA GROUP: First Half Results Support Moody's B1 CFR
* Fitch Says Key Challenges Remain for Chinese Securitisations
I N D I A
ACE AUTOCARS: CRISIL Assigns 'B+' Rating to INR100MM Cash Credit
APEX LABORATORIES: CRISIL Cuts Rating on INR1.00BB Loans to 'BB+'
BANSAL BROTHERS: CRISIL Assigns 'BB+' Ratings to INR120MM Loans
BHANOT CONSTRUCTION: CRISIL Cuts Ratings on INR150MM Loans to 'B'
C.H.V.N. REDDY: CRISIL Assigns 'BB-' Ratings to INR35MM Loans
CALICA RESOURCES: CRISIL Cuts Ratings on INR12MM Loans to 'B'
CHOWDHRY RUBBER: CRISIL Assigns 'B+' Rating to INR125MM Loan
LAKSHMI FLOUR: CRISIL Revokes Suspension of 'BB-' Loan Rating
PACK PRINT: CRISIL Assigns 'B+' Ratings on INR115MM Loans
SONAKI CERAMIC: CRISIL Upgrades Ratings on INR100MM Loans to 'B-'
STRAWBERRY STUDIO: CRISIL Reaffirms BB+ Ratings on INR45MM Loans
SURESH PRODUCTIONS: CRISIL Cuts Rating on INR200MM Loans to 'BB-'
* Moody's Sees Slump in Credit Quality for India's Oil Sector
N E W Z E A L A N D
GENESIS POWER: S&P Raises Rating on Capital Bonds to 'BB+'
NELSON BUILDING: Fitch Affirms 'BB+' LT Issuer Default Rating
SOUTHLAND BUILDING: Fitch Revises Support Rating Floor From 'B+'
WAIRARAPA BUILDING: Fitch Affirms 'BB+' Issuer Default Rating
* Another Construction Firm Collapse in Christchurch Likely
P A K I S T A N
* To Get More than $330MM Loan From IDB; Avoids Insolvency
S O U T H K O R E A
SK HYNIX: Solid Financials Prompt Moody's to Raise CFR to Ba2
- - - - -
=================
A U S T R A L I A
=================
ELITE CRANES: Repays AUD67,057 Debt; Staves Off Liquidation
-----------------------------------------------------------
The Sydney Morning Herald reports that prominent debt collector
Mick Gatto and business partner Matt Tomas have staved off the
collapse of their crane hire business by the last minute payment
of a AUD67,057 debt.
SMH says Brooklyn-based Elite Cranes was facing insolvency over a
long-running debt to subcontractor APAC Crane Hire, which the
Supreme Court had ordered must be paid by August 7 or the company
would be liquidated.
Mr. Gatto and Mr. Tomas kept control of their business after the
dispute was settled on the court house steps ahead of the
scheduled hearing, the report relates.
According to the report, the money will go to the creditors of
APAC Crane Hire, which was placed into administration in 2011 with
debts of more than AUD1 million. Administrator Philip Newman of
PCI Partners confirmed Elite had paid its bill in full and the
legal proceeding had been discontinued, the report says.
But Elite Cranes' financial problems have been overshadowed by
revelations that a secret recording of Mr. Tomas providing
assistance in a police murder investigation has been widely leaked
to Melbourne's underworld, potentially putting his life in danger,
according to the report.
Mr. Tomas, who was acquitted of murder charges in the 1996 bashing
death of a teenager, was himself the subject of alleged murder
plot in 2003 by Tommy "Little Tommy" Ivanovic, the report adds.
GMK EXPLORATION: Gold Miner Placed in Administration
----------------------------------------------------
Yolanda Redrup at SmartCompany reports that a West Australian gold
mining business with AUD14 million in debt has collapsed, with
administrators saying the tough environment has led to a raft of
industry collapses this year.
SmartCompany relates that GMK Exploration (GMKE), a subsidiary of
ASX-listed company Reed Resources, has been placed in
administration with Darren Weaver -- darren.weaver@fh.com.au --and
Andrew Saker -- andrew.saker@fh.com.au -- appointed from Ferrier
Hodgson.
Mr. Weaver told SmartCompany cashflow difficulties associated with
the lower-than-normal production of gold resulted in the collapse.
"It is a reflection of gold price and rising cost curves combined
with difficulties with the grade coming from the mines," the
report quotes Mr. Weaver as saying. "The trade creditors are owed
around AUD14 million and of course we're still reconciling the
financials with the clients."
The business had been operating the Meekatharra Gold Project, but
gold production at the mine had been adversely affected during the
June quarter from lower head grade. Head grade impacts the amount
of gold which can be recovered.
HS VISION: Directors Confident of Finance Agreement
---------------------------------------------------
Nick Dalton at The Cairns Post reports that directors of embattled
property developer HS Vision Group are confident of reaching a
refinancing agreement.
This follows meetings with ANZ Bank and the receivers of most of
its assets, including Paradise Palms Golf Course, Cairns One and
The Lakes, according to The Cairns Post.
The report relates that directors Ross Straguszi and Rose-Marie
Dash are in Hong Kong negotiating a deal with a financier to
reverse six of the group's businesses continuing in receivership
or administration.
The report discloses that Mr. Straguszi said it was "really
appreciated that they made themselves available to meet,
especially so quickly.
Mr. Straguszi said HS Vision Group "remained in negotiations about
a revised refinance proposal satisfactory to all parties" with the
details remaining under wraps because they were commercial in
confidence, the report says.
"We need a bit of room at the moment to continue to deal with the
bank and the receivers and the financiers," the report quoted Mr.
Straguszi as saying.
The Cairns Post notes that the bank placed the golf course and
management rights to Cairns One, The Lakes, The Greens and The
Keys in receivership.
Pelicans Childcare Centres were taken over by a voluntary
administrator.
The report relays that the golf course and clubhouse remain open
and staff are being retained at The Keys, The Greens, The Lakes
and Cairns One.
Grant Thornton Australia partners Shaun McKinnon and Michael
McCann were appointed voluntary administrators of five Pelicans
Childcare Centres in Cairns, Atherton and Innisfail, the report
discloses. They continue to operate as usual, the report adds.
PAPERLINX LTD: Annual Loss Narrows to AUD90.2MM in 2012/13
----------------------------------------------------------
Trevor Chappell at Australian Associated Press reports that ailing
paper merchant PaperlinX Limited has incurred another loss but
said its financial performance is improving.
AAP relates that PaperlinX made a net loss of AUD90.2 million in
the 2012/13 financial year, an improvement on a AUD266.7 million
loss in the prior year.
According to the report, the previous year's loss included
AUD214 million in losses from asset writedowns, business sales and
restructuring costs, while costs from restructuring and asset
writedowns in the 2012/13 financial year totalled
AUD51.7 million.
"2013 demonstrates that we are delivering our turnaround
strategy," the report quotes PaperlinX chief executive Dave Allen
as saying.
AAP says the company shed 600 staff in the year, about
12 per cent of its workforce. Those cuts and other initiatives to
reshape the business are expected to deliver permanent cost
savings of between AUD35 million and AUD40 million in the 2013/14
financial year, the report relates.
The company said it will also seek more ways to cut costs in the
current financial year, AAP adds.
About PaperlinX Limited
Based in Australia, PaperlinX Limited (ASX:PPX) --
http://www.paperlinx.com.au/-- is a fine paper merchant and
manufacturer of communication and packaging paper. PaperlinX
employs over 9,600 people in 28 countries.
PaperlinX reported an annual loss of AUD108 million in the 2011
financial year, a loss of AUD225 million in 2010, and a loss of
AUD798 million in 2009.
PaperlinX booked an annual loss of AUD266.7 million for the year
to June 30, 2012, after writing off the value of its European
operations, smh.com.au disclosed.
In February, AAP relates, it posted a first half loss of
AUD57.3 million and said it hoped to return to profitability in
2014 following a major restructure.
TASSAL GROUP: Returns to Business Following Receivership
--------------------------------------------------------
Nick Clark at The Mercury reports that salmon farmer Tassal has
continued one of the great business comebacks in Tasmanian
corporate history, topping the scales with a record profit of
$33.46 million for the past financial year.
Australia's growing love affair with salmon helped increase
company revenue to AU$272 million, for a 19 per cent rise in net
profit, according to The Mercury.
The report relates that the profit result was the biggest since
Tassal Group Limited was relisted on the ASX in 2003 after
collapsing into receivership in 2002. The result was celebrated
by the company, including Tassal Salmon Shop national business
manager David Forrest and Jessica Widdison.
The report discloses that Tassal Managing director Mark Ryan said
the result followed a company strategy to increase domestic per-
capita consumption.
Tasmania's salmon industry is now worth more than half a billion
dollars a year to the state economy, as well as being a major
employer, the report says.
The report recalls that Tassal Limited collapsed in 2002 with
debts of AU$30 million and was operated by receivers Korda Mentha.
The report relates that while in receivership, the small fish
swallowed the big fish when Tassal took over Nortas for AUD11
million.
Mr. Ryan moved from being the receiver with Korda Mentha to chief
executive of the new Tassal Group Limited, which was bought by
Melbourne entrepreneur David Williams for AUD44 million and
relisted on the ASX in 2003, the report notes.
Mr. Ryan forecast continued growth with its focus on growing the
domestic market, the report adds.
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C H I N A
=========
KAISA GROUP: First Half Results Support Moody's B1 CFR
------------------------------------------------------
Moody's Investors Service says Kaisa Group Holdings Ltd.'s 1H 2013
interim results are generally within Moody's expectations, and
support its B1 corporate family and senior unsecured ratings and
stable outlook.
"We expect Kaisa's revenue to continue to achieve double-digit
growth in the next 12-18 months, following a period of strong
contract sales performance," says Franco Leung, a Moody's
Assistant Vice President and Analyst.
Kaisa reported revenue of RMB16.7 billion for the 12 months ended
June 2013, and representing 39% growth from the RMB12 billion
recorded for FY2012.
At the same time, it reported 63% year-on-year growth in contract
sales to RMB12.9 billion for January-July 2013. The strong sales
growth and an increase in its average selling price are in line
with Moody's expectation that the company will benefit from its
focus on top-tier cities such as Shenzhen.
"But Kaisa's increased appetite for land acquisitions and debt-
funded expansion could constrain its ratings in the near-term,"
says Leung, also Moody's Lead Analyst for Kaisa.
Kaisa has stepped up its pace of land replenishment this year. It
acquired about RMB8.7 billion of land in 1H 2013, well above the
RMB5.8 billion spent in all of FY2012.
Such expenditure on land has raised its debt leverage, measured by
adjusted debt/capitalization, to 56.4% as of end-June 2013
compared with 53.7% at end-2012. Any material deleveraging in the
next 12 months appears unlikely.
However, despite its higher debt leverage, EBITDA/interest
coverage -- adjusted for capitalized interests -- improved to
around 2.3x at end-June 2013 from 1.9x at end-June 2012, driven by
its higher volume of completed property sales and stable profit
margins.
Moody's expects interest coverage to further improve to around
2.5x-3.0x in the next 12 months.
The company's adequate liquidity position also continues to
support its B1 rating. Its cash on hand of RMB6.18 billion as of
June 2013 and improved operating cash flow will likely cover its
short-term debt of RMB3.66 billion and outstanding land premium of
RMB5.4 billion for the next 12 months.
The principal methodology used in this rating was the Global
Homebuilding Industry Methodology published in March 2009.
Kaisa Group Holdings Ltd, a Shenzhen-based property developer, was
established in 1999 and listed on the Hong Kong Stock Exchange in
December 2009. As of June 2013, the company was 62.4% owned by the
founder and his family members.
Kaisa had a land bank of around 24.8 million square meters in
gross floor area in the Pearl River and Yangtze River Deltas,
Bohai Rim, and central and western China as of June 2013.
* Fitch Says Key Challenges Remain for Chinese Securitisations
--------------------------------------------------------------
Fitch Ratings says securitisations in China continue to face key
challenges in legal enforceability, data robustness and integrity,
as well as underwriting and servicing standards. These are some of
the rating considerations Fitch would factor into its analysis of
Chinese securitisations.
In a special report published today, Fitch says true sale and
bankruptcy remoteness are yet to be tested in Chinese
securitisations under the specific asset management programme
(SAMP). These transactions are weak in legal structure as they
only rely on rules issued by the regulatory authority - Chinese
Security Regulatory Commission. Because they are not enacted laws,
it is possible that these rules may not be upheld in Chinese
courts.
Lack of data robustness can be an impediment to the development of
the securitisation market in China. There is sometimes an
unavailability of a long history of portfolio data that is
generally required in securitisations, due to the short history of
both certain asset classes and detailed collection of data.
Because China has had more than 30 years of continuous and rapid
economic growth, portfolio data is therefore reported under an
extended, benign economy and does not capture any stressful
periods. Data such as this provides limited insight for gauging
future performance, especially in an economic downturn.
Although market data can be used in the absence of individual
portfolio data, such data is largely unavailable in China, as
public disclosure of portfolio information is yet to be widely
accepted and Chinese regulators do not aggregate and publish data
by individual asset class.
Fitch expects more companies will tap the securitisation market
under both the SAMP and the credit asset securitisation scheme
after new rules expanded the eligible originators, asset classes
and investors. Fitch expects these new originators to have robust
underwriting policies and vigorous monitoring, servicing,
collection and reporting procedures in place to meet standards
required in a securitisation. Standards for securitisation may be
higher than what Chinese companies would normally adopt.
=========
I N D I A
=========
ACE AUTOCARS: CRISIL Assigns 'B+' Rating to INR100MM Cash Credit
----------------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable' rating to the long-term
bank facility of Ace Autocars Pvt Ltd.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 100 CRISIL B+/Stable
The rating reflects AAPL's below-average financial risk profile,
marked by a high gearing and below-average debt protection
metrics, and modest scale of operations in the intensely
competitive automobile dealership industry. These rating
weaknesses are partially offset by AAPL's established relationship
with Tata Motors Ltd (TML; rated 'CRISIL AA-/Positive/CRISIL
A1+').
Outlook: Stable
CRISIL believes that AAPL will maintain its established position
in the automobile dealership market for TML near Cuttack (Orissa),
supported by its promoters' extensive industry experience. The
outlook may be revised to 'Positive' in case of significant
increase in the company's revenues coupled with improvement in its
capital structure and liquidity. Conversely, the outlook may be
revised to 'Negative' in case of deterioration in AAPL's operating
margin or debt protection metrics, or larger-than-expected debt-
funded capital capex, leading to deterioration in its financial
risk profile.
AAPL, established in 2008, is an exclusive dealer of TML's
passenger cars. AAPL has a showroom-cum-workshop near Cuttack. The
company is promoted by Mr. Dharmaditya Pattanaik and his wife,
Mrs. Sanjana Sanghamitra Das and Mr. Divyaloka Pattanaik. AAPL has
been dealing in TML's passenger vehicles since February 2010.
AAPL reported a provisional profit after tax of INR5 million on
net sales of INR565 million for 2012-13 (refers to financial year,
April 1 to March 31), against a PAT of INR11 million on net sales
of INR772 million for 2011-12.
APEX LABORATORIES: CRISIL Cuts Rating on INR1.00BB Loans to 'BB+'
-----------------------------------------------------------------
CRISIL has downgraded its ratings on the bank facilities of Apex
Laboratories Pvt Ltd to 'CRISIL BB+/Negative/CRISIL A4+' from
'CRISIL BBB-/Negative/CRISIL A3'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 20 CRISIL A4+ (Downgraded from
'CRISIL A3')
Cash Credit 400 CRISIL BB+/Negative (Downgraded
from 'CRISIL BBB-/Negative')
Export Packing 150 CRISIL A4+ (Downgraded from
Credit 'CRISIL A3')
Letter of Credit 60 CRISIL A4+ (Downgraded from
'CRISIL A3')
Long-Term Loan 602.9 CRISIL BB+/Negative (Downgraded
from 'CRISIL BBB-/Negative')
The rating action reflects CRISIL's belief that Apex Laboratories'
liquidity will remain constrained over the medium term due to its
significant exposure to group entities. Loans and advances
extended by the company to group entities increased to INR710
million as on March 31, 2013, from INR534 million as on March 31,
2012. Consequently, Apex Laboratories utilised its bank facilities
extensively at an average of 95.4 per cent during the 12 months
through March 2013. The gearing levels also increased to 1.4 times
as on March 31, 2013, from 1.2 times as on March 31, 2012. The
company's ongoing capital expenditure (capex) of INR410 million
will further pressurise its liquidity. The quantum of Apex
Laboratories' exposure to its group entities will remain a key
rating sensitivity factor.
The ratings reflect Apex Laboratories' moderate debt protection
metrics, and established market position in the therapeutic
healthcare segment. These rating strengths are partially offset by
the company's considerable exposure to group companies,
significant dependence on the Zincovit brand, and exposure to
risks inherent in the pharmaceutical sector.
Outlook: Negative
CRISIL believes that Apex Laboratories' financial risk profile
will remain constrained over the medium term by its significant
funding exposure to affiliates and its large, ongoing debt-funded
capex. The ratings may be downgraded if the company's liquidity
weakens further, most likely because of additional financial
support to its affiliates, a time or cost overrun in its ongoing
project, or lower-than-expected cash accruals. Conversely, the
outlook may be revised to 'Stable' if Apex Laboratories
substantially reduces its exposure to its affiliates, generates
healthy cash accruals, and efficiently manages its working capital
requirements.
Apex Laboratories was incorporated in 1978 in Chennai (Tamil
Nadu). The company manufactures formulation drugs in the anti-
infective, anti-pyretic, analgesic, nutraceutical, and anti-
asthmatic therapeutic segments.
BANSAL BROTHERS: CRISIL Assigns 'BB+' Ratings to INR120MM Loans
---------------------------------------------------------------
CRISIL has assigned its 'CRISIL BB+/Stable' rating to the long-
term bank facilities of Bansal Brothers (Delhi).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Overdraft Facility 95 CRISIL BB+/Stable
Proposed Long-Term 25 CRISIL BB+/Stable
Bank Loan Facility
The rating reflects the benefits that BBRS derives from its
partners' extensive experience in the steel trading industry, long
association with Tata Steel Ltd., and its above-average financial
risk profile, marked by a healthy total outside liabilities to
tangible net worth ratio and above-average debt protection
metrics. These rating strengths are partially offset by BBRS's low
profitability due to limited value addition and modest scale of
operations in an intensely competitive and fragmented industry.
Outlook: Stable
CRISIL believes that BBRS will continue to benefit over the medium
term from its partners' extensive experience in the steel
industry. The outlook may be revised to 'Positive' if the firm
generates more-than-expected cash accruals most likely due to
significant improvement in its scale of operations, while
maintaining profitability and capital structure, thereby leading
to improvement in its financial risk profile. Conversely, the
outlook may be revised to 'Negative' if BBRS's financial risk
profile weakens because of lengthening of its working capital
cycle or if the firm registers a decline in its profitability or
revenues resulting in lower-than-expected cash accruals, leading
to a stretch in its liquidity.
BBRS was set up by Mr. Yash Pal Bansal, Mr. Ravi Lochan Gupta, and
Mrs. Champawati Gupta. BBRS trades in cold-rolled and hot-rolled
steel and is one of the two authorised dealers for TATA Steelium
(cold-rolled coils of Tata Steel) in Delhi and Faridabad
(Haryana). BBRS has been in the steel trading business for around
50 years.
For 2011-12 (refers to financial year, April 1 to March 31), BBRS
reported a profit after tax (PAT) of INR14.9 million on net sales
of INR710.3 million, against a PAT of INR14.5 million on net sales
of INR672.1 million for 2010-11.
BHANOT CONSTRUCTION: CRISIL Cuts Ratings on INR150MM Loans to 'B'
-----------------------------------------------------------------
CRISIL has downgraded its rating on the bank facilities of
Bhanot Construction and Housing Ltd to 'CRISIL B/Stable' from
'CRISIL B+/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 90 CRISIL B/Stable (Downgraded
from 'CRISIL B+/Stable')
Proposed Long-Term 60 CRISIL B/Stable (Downgraded
Bank Loan Facility from 'CRISIL B+/Stable')
The rating downgrade reflects deterioration in BCHL's liquidity on
account of deterioration in the company's working capital
management. BCHL's receivable days increased to around 275 days as
on March 31, 2013 from 162 days as on March 31, 2012. The steep
increase in receivables is on account of customer non-payment for
the work done by the company in 2011-12 (refers to financial year
April 1 to March 31). This led to significant increase in
receivables outstanding for more than 365 days to around INR150
million as on March 31, 2013 against a net worth of around INR143
million as on March 31, 2013. Furthermore, BCHL's sales declined
to INR590 million in 2012-13 as compared to 1.12 billion in 2011-
12. The decline in sales resulted in reduction in net cash
accruals to INR16.5 million in 2012-13 from INR47.0 million in
2011-12, against large working capital requirements. CRISIL
believes that BCHL's liquidity will remain weak over the medium
term, marked by low cash accruals, and by fully utilised bank
limits because of large working capital requirements.
The rating continues to reflect BCHL's small scale of operations,
and large working capital requirements. These rating weaknesses
are partially offset by the extensive industry experience of
BCHL's promoter.
Outlook: Stable
CRISIL believes that BCHL will continue to benefit over the medium
term from its promoter's industry experience. The outlook may be
revised to 'Positive' if the company registers improvement in its
scale of operations, while it maintains its profitability and
improves its working capital management, leading to improvement in
its cash accruals and, as a result, in its liquidity. Conversely,
the outlook may be revised to 'Negative' in case BCHL's working
capital requirements are larger than expected or if the company
generates lower-than-expected cash accruals, resulting in decline
in its liquidity.
BCHL was set up in 1983 by Mr. R D Bhanot. It is involved in the
hospitality, real estate, trading, and facility management
businesses in National Capital Region.
BCHL reported a profit after tax (PAT) of INR2.15 million on net
sales of INR590.0 million for 2012-13, against a PAT of INR34.5
million on net sales of INR1.21 billion for 2011-12.
C.H.V.N. REDDY: CRISIL Assigns 'BB-' Ratings to INR35MM Loans
-------------------------------------------------------------
CRISIL has assigned its 'CRISIL BB-/Stable/CRISIL A4+' ratings to
the bank facilities of C.H.V.N. Reddy.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Term Loan 5 CRISIL BB-/Stable
Bank Guarantee 25 CRISIL A4+
Cash Credit 30 CRISIL BB-/Stable
The ratings reflect the extensive experience of CHVNR's proprietor
in the construction sector. This rating strength is partially
offset by the firm's working-capital-intensive, and modest scale
of operations in the highly fragmented construction sector.
Outlook: Stable
CRISIL believes that CHVNR will maintain its stable business risk
profile over the medium term, backed by its established customer
relations, and the proprietor's extensive industry experience. The
outlook may be revised to 'Positive' if the firm significantly
increases its scale of operations along with its operating
profitability, resulting in higher-than-expected cash accruals;
and enhances its liquidity with efficient working capital
management. Conversely, the outlook may be revised to 'Negative'
if the firm reports a sizeable decrease in its scale of
operations, which adversely impacts its cash accruals; or
deterioration in its liquidity driven by substantial working
capital requirements or debt-funded capital expenditure
programme(s).
CHVNR was established in 1986 as a proprietorship firm, by Mr.
C.H.V.N Reddy. The firm undertakes civil construction projects,
including construction of roads and water tanks for the Karnataka
Public Works Department (PWD), Minor Irrigation Department, and
the National Highways Authority of India.
CALICA RESOURCES: CRISIL Cuts Ratings on INR12MM Loans to 'B'
-------------------------------------------------------------
CRISIL has downgraded its rating on the long-term bank facilities
of Calica Resources Pvt Ltd to 'CRISIL B/Stable' from 'CRISIL
B+/Stable' and has reaffirmed the rating on the company's short-
term bank facilities at 'CRISIL A4'.
Amount
Facilities (INR Mln) Ratings
---------- -------- -------
Export Packing Credit 10.0 CRISIL B/Stable (Downgraded
from 'CRISIL B+/Stable')
Export Packing Credit 90.0 CRISIL A4 (Reaffirmed)
Proposed Long-Term 2.0 CRISIL B/Stable (Downgraded
Bank Loan Facility from 'CRISIL B+/Stable')
The downgrade reflects CRISIL's expectation that the business risk
profile the company will remain weak with a restricted revenue
profile. The company booked revenue of INR379 million in 2012-13
(refers to financial year, April 1 to March 31) registering lower-
than-expected revenue. The revenues are lower than expectations
due to sharp decline in guar gum prices in 2012-13 and also due to
lower than expected order flow. The financial risk profile has,
however, remained healthy with low gearing of 0.44 times as on
March 31, 2013, and healthy debt protection metrics.
The ratings continue to reflect CRPL's small scale of operations
in a highly fragmented agri-commodity industry and susceptibility
of the company's profitability to volatility in guar gum prices
and foreign exchange rates. These rating weaknesses are partially
offset by CRPL's above-average financial risk profile, marked by
low gearing and strong debt protection metrics, and the extensive
industry experience of its promoters in the agri-commodity
industry.
Outlook: Stable
CRISIL believes that CRPL will benefit over the medium term from
its promoters' extensive industry experience. The outlook may be
revised to 'Positive' if the company registers higher-than-
expected offtake and operating margin leading to healthy accruals
or efficient working capital management. Conversely, the outlook
may be revised to 'Negative' in case of increase in working
capital requirements or climatic changes affecting supply of
inputs or development of new substitutes or lower-than-expected
accruals.
Incorporated in 2011, CRPL is promoted by Ahmedabad (Gujarat)-
based Mr. Ankit Patel and Mr. Sandeep Patel. The company
manufactures guar gum.
CRPL reported, on a provisional basis, net loss of INR0.5 million
on net sales of INR379.4 million for 2012-13.
CHOWDHRY RUBBER: CRISIL Assigns 'B+' Rating to INR125MM Loan
------------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable/CRISIL A4' ratings to
the bank facilities of Chowdhry Rubber & Chemical Pvt. Ltd.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Letter of Credit 75 CRISIL A4
Bank Guarantee 20 CRISIL A4
Cash Credit 125 CRISIL B+/Stable
The ratings reflect CRPL's below-average financial risk profile
marked by highly leveraged capital structure, its moderate scale
of operations in the intensely competitive chemical trading
industry. The rating also reflects its large working capital
requirements and vulnerability of its operating margins to
volatility in raw material prices and foreign exchange rates.
These rating weaknesses are partially offset by the benefits CRPL
derives from its promoters' extensive experience in the chemical
trading business, and financial support it receives from them. The
rating also reflects its diverse customer base of diverse
industries and moderate interest coverage ratio.
Outlook: Stable
CRISIL expects the business risk profile of CRPL to be supported
by its experienced promoters and its diversified customer base.
The outlook may be revised to 'Positive' if the company's
financial risk profile, particularly its liquidity, improves, most
likely because of better-than-anticipated accruals, lower-than-
expected working capital requirements, or infusion of substantial
capital by its promoters. Conversely, the outlook may be revised
to 'Negative' if CRPL's working capital management weakens
further, or if it undertakes a debt-funded capital expenditure
programme, leading to further deterioration in its overall
financial risk profile, especially its liquidity.
CRPL was established by Mr.Deepak Chaddha and his family members
in 2008 as a private limited company, by reconstituting Chowdhry
Rubber and Chemical, set up in 1972, by Late Shri V.M Chaddha. The
company trades rubber chemicals, rubber and allied products. The
company also acts as a consignment stockist for Aditya Birla Nuvo
for Carbon Black. Headquartered in New Delhi, CRPL has its branch
offices and warehouses located at Daya Basti, Tikri & Telco in New
Delhi, Bahadurgarh (Haryana), Ghaziabad (Western UP), Bhiwadi
(Rajasthan), Aluva & Kochi (Kerala) and Chennai (Tamil Nadu).
LAKSHMI FLOUR: CRISIL Revokes Suspension of 'BB-' Loan Rating
-------------------------------------------------------------
CRISIL has revoked the suspension of its rating on the bank
facilities of Lakshmi Flour Mills, and has assigned its 'CRISIL
BB-/Stable' rating to these facilities.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 70 CRISIL BB-/Stable (Assigned;
Suspension revoked)
The ratings had been suspended by CRISIL as per its rating
rationale dated March 1, 2011, as LFM had not provided the
necessary information required for reviewing the ratings. LFM has
now shared the requisite information, thereby enabling CRISIL to
assign ratings to the bank facilities.
The rating reflects LFM's promoter's extensive industry experience
and its established customer relationships. These rating strengths
are partially offset by its moderate financial risk profile, its
small scale of the firm's operations and exposure to intense
competition in the wheat processing industry, and susceptibility
to volatility in raw material prices.
Outlook: Stable
CRISIL believes that LFM will continue to benefit over the medium
term from its promoters' industry experience and its longstanding
customer relationships. The outlook may be revised to 'Positive'
if LFM continues to improve its profitability over the medium
term, which results in an improvement in its financial risk
profile. Conversely, the outlook may be revised to 'Negative' if
there is a sharp decline in LFM's margins, or the firm undertakes
a larger-than-expected debt-funded capital expenditure program or
any significant capital withdrawal by the promoters resulting in
deterioration in its financial risk profile.
LFM, based in Devangere, Karnataka, is engaged in processing of
wheat products, such as maida, suji, atta and bran. The firm is
managed by Mr. S.S Ganesh who has an extensive experience in the
food processing industry.
LFM is estimated to report profit after tax (PAT) of INR46.5
million on net sales of INR473.6 million for 2012-13 (refers to
financial year, April 1 to March 31); the company reported a PAT
of INR20.2 million on net sales of INR305.6 million for 2011-12.
PACK PRINT: CRISIL Assigns 'B+' Ratings on INR115MM Loans
---------------------------------------------------------
CRISIL has assigned its ratings of 'CRISIL B+/Stable/CRISIL A4' to
the bank facilities of Pack Print Industries (India) Private
Limited.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Term Loan 30 CRISIL B+/Stable
Import Letter of 30 CRISIL A4
Credit Limit
Bank Guarantee 5 CRISIL A4
Cash Credit 85 CRISIL B+/Stable
The ratings reflect the PPIPL's modest scale of operations,
working capital intensive nature of operations. The ratings also
factors in below-average financial risk profile marked by low
networth, high gearing and subdued debt protection measures. These
rating weaknesses are mitigated by the extensive experience of the
promoters in the industry and established relations with its
customers.
Outlook: Stable
CRISIL expects PPIPL to maintain its stable business risk profile
over the medium term, backed by its promoter's extensive
experience and established relationships with its customers and
suppliers. The outlook may be revised to 'Positive' if the company
reports higher than expected growth in revenues and profitability,
while improving its capital structure. Conversely the outlook may
be revised to 'Negative' if PPIPL's financial risk profile
deteriorates, because of sharp decline in profitability or
revenues, a higher-than-expected debt-funded capital expenditure,
or deterioration in its working capital cycle.
Pack Print Industries (India) Pvt. Ltd was incorporated in 2011 by
Mumbai based Shah family, Mr. Prakash Shah and his brothers, Mr.
Hasmukhlal Shah. The company took over the business of Pack print
Industries, a partnership firm of the shah family which was
established in 1975. The company is engaged in the manufacturing
of plastic bags, plastic rolls, and plastic sheets. The
manufacturing facility, located in Daman. The company's clientele
is diversified across industries like pharmaceuticals, textiles
and FMCG. The registered office is located at Lower Parel, Mumbai.
PPIPL reported on provisional basis a profit after tax (PAT) of
INR6.2 million on net sales of INR679.7 million for 2012-13
(refers to financial year, April 1 to March 31), as against a PAT
of INR4.2 million on net sales of INR500.5 million for 2011-12.
SONAKI CERAMIC: CRISIL Upgrades Ratings on INR100MM Loans to 'B-'
-----------------------------------------------------------------
CRISIL has upgraded its ratings on the bank facilities of Sonaki
Ceramic to 'CRISIL B-/Stable/CRISIL A4' from 'CRISIL D/CRISIL D'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 30.0 CRISIL B-/Stable (Upgraded
from 'CRISIL D')
Term Loan 70.0 CRISIL B-/Stable (Upgraded
from 'CRISIL D')
Bank Guarantee 3.0 CRISIL A4 (Upgraded from
'CRISIL D')
The rating upgrade reflects the timely servicing of debt by SC
over the past six months through July 2013. The upgrade also
factors in CRISIL's belief that SC will continue to receive
funding support from its promoters for timely repayment of its
term debt obligations.
The rating also reflects SC's weak financial risk profile, marked
by small net worth, high gearing, subdued debt protection metrics,
modest scale of operations, and exposure to intense competition
and offtake risks in the ceramic tableware industry. These rating
weaknesses are partially offset by the extensive industry
experience of SC's partners.
Outlook: Stable
CRISIL believes that SC will continue to benefit over the medium
term from its promoters' extensive industry experience. The
outlook may be revised to 'Positive' if SC scales up its
operations and registers significant increase in its revenue and
profitability leading to improvement in its financial risk
profile, or in case of equity infusion, which results in sizeable
improvement in its capital structure. Conversely, the outlook may
be revised to 'Negative' if there is any stretch in the firm's
working capital cycle that leads to deterioration in liquidity or
if SC undertakes any large debt-funded capital expenditure
programme resulting in further weakening of its financial risk
profile.
Set up in 2008, SC manufactures bone-china-based crockery items
such as cups, plates, and saucers. It has been promoted by Mr.
Kishore Patel and his family as a partnership firm.
SC is estimated to have reported net loss of INR19.6 million on
net sales of INR37.3 million in 2012-13 (refers to financial year,
April 1 to March 31), which was its first full year of operations.
STRAWBERRY STUDIO: CRISIL Reaffirms BB+ Ratings on INR45MM Loans
----------------------------------------------------------------
CRISIL's ratings on the bank facilities of Strawberry Studio
Exports Pvt Ltd continue to reflect the extensive experience of
SSEPL's promoter in manufacturing garments.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Export Packing Credit 50 CRISIL A4+ (Reaffirmed)
Foreign bill purchase 30 CRISIL BB+/ Stable
(Reaffirmed)
Standby Line of credit 15 CRISIL BB+/ Stable
(Reaffirmed)
Letter of Credit 5 CRISIL A4+ (Reaffirmed)
This rating strength is partially offset by SSEPL's small scale of
operations, customer concentration in its revenue profile, and
weak bargaining power against large customers. The ratings also
factor in the vulnerability of the company's margins to volatility
in raw material prices.
Outlook: Stable
CRISIL believes that SSEPL will continue to benefit over the
medium term from the extensive experience of its promoter in the
ready-made garments (RMG) industry and its established
relationships with key customers. The outlook may be revised to
'Positive' if the company significantly scales up its operations
and improves its customer diversity, while maintaining its
profitability. Conversely, the outlook may be revised to
'Negative' if SSEPL undertakes a larger-than-expected debt-funded
capital expenditure (capex) programme, if there is a steep decline
in its profitability leading to lower-than-expected cash accruals,
or if its working capital cycle deteriorates significantly,
thereby constraining its liquidity.
Update
For 2012-13 (refers to financial year, April 1 to March 31), SSEPL
reported operating revenues of INR397 million, a healthy year-on-
year growth of more than 20 per cent, though on a smaller base.
The growth, which was higher the CRISIL's expectation, is
primarily attributed to increased offtake from its existing
customers. The revenues remained highly concentrated with the top
three customers contributing more than 90 per cent, and its single
major customer Mayoral Moda Infantil SAU (Mayoral) contributing
around 70 per cent, of the company's total revenues in 2012-13.
SSEPL's operating profitability declined to around 6.24 per cent
in 2012-13 from 7.89 per cent in 2011-12, primarily driven by
rising raw material prices and limited bargaining power with large
customers in a highly fragmented industry. CRISIL expects SSEPL's
operating revenues to remain around INR460 million, with operating
profitability of 6 to 7 per cent, in 2013-14.
SSEPL's financial risk profile remains below-average, marked by
weak debt protection metrics and a small net worth, though
partially supported by moderate gearing. Its gearing was at 0.97
to 1.43 times in the past five years, and stood at 1.43 times as
on March 31, 2013. CRISIL believes that SSEPL's gearing will
remain moderate over the medium term owing to absence of any debt-
funded capex plans and moderate incremental working capital
requirements commensurate with its expected revenue growth.
SSEPL's debt protection metrics are expected to remain below
average over this period owing to its low profitability, with
interest coverage ratio and net cash accruals to total debt ratio
at 2.0 to 2.2 times and 0.07 to 0.09 times, respectively.
SSEPL's liquidity is adequate, marked by adequate cash accruals
expected for 2013-14 vis-a-vis low repayment obligations towards
vehicle loans, and continuous support from its promoters and their
related entities through interest-free unsecured loans and
advances; the balance of these stood at INR20.75 million as on
March 31, 2013. However, the company's liquidity is partially
constrained by its high bank limit utilisation, at an average of
around 90 per cent over the 12 months through April 2013 owing to
its working-capital-intensive operations.
SSEPL reported a profit after tax (PAT) of INR3.2 million on net
sales of INR365.3 million for 2012-13 (refers to financial year,
April 1 to March 31), against a PAT of INR5.5 million on net sales
of INR305.3 million for 2011-12.
Promoted by Mr. Hemant Ruparelia in 1996, SSEPL manufactures RMG
for the export markets. The company makes woven garments of all
varieties and fabrics, primarily for children (about 98 per cent
of its revenues in 2012-13). The work involves printing, enzyme
washing, embroidering, and stitching the final product based on
customers' design specifications. It has an installed capacity of
manufacturing 1.6 to 1.8 million pieces per annum.
SURESH PRODUCTIONS: CRISIL Cuts Rating on INR200MM Loans to 'BB-'
-----------------------------------------------------------------
CRISIL has downgraded its rating on the long-term bank facility of
Suresh Productions Entertainment Ltd (SPEL; part of the SPEL
group) to 'CRISIL BB-/Stable' from 'CRISIL BB/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 200 CRISIL BB-/Stable (Downgraded from
'CRISIL BB/Stable')
The rating downgrade reflects the continued support extended by
the SPEL group to its other affiliate companies, adversely
affecting its financial flexibility and liquidity profile. The
loans and advances by the SPEL group to its affiliates is
estimated to have increased to INR207 million (around 50 per cent
of the group's estimated net-worth) as on March 31, 2013 from
INR32 million as on March 31, 2010. Any substantial change in the
loans and advances extended by SPEL group to its affiliates will
remain a key rating sensitivity factor for SPEL.
The rating continues to reflect the SPEL group's established
presence in the movie production, distribution, and exhibition
businesses, and its above-average financial risk profile marked by
healthy net worth, moderate gearing and above-average debt-
protection measures. These strengths are partially offset by the
group's exposure to geographic concentration in its revenue
profile and to risks inherent in the film industry.
For arriving at the ratings, CRISIL has combined the business and
financial risk profiles of SPEL and Suresh Productions Pvt Ltd
(SPPL). This is because these entities, collectively referred to
as the SPEL group, are under a common management, and have
significant operational and financial linkages. For the previous
rating exercise for SPEL's bank facilities, CRISIL had combined
the business and financial risk profiles of SPPL, SPEL, Suresh
Productions (SP), Suresh Movies Film Distributors (SMFD;
operations of SMFD have been merged with SPEL), and Rama Naidu
Film Products (RFP). The change in the analytical approach is on
account of the management's decision to operate SP and RFP
independently; transactions with these companies will be
undertaken at arm's length.
Outlook: Stable
CRISIL believes that the SPEL group will maintain its favourable
business risk profile over the medium term on the back of its
established presence across the entire film business value chain
in Andhra Pradesh and its promoters extensive industry experience.
The outlook may be revised to 'Positive' if the group realises a
substantial portion of its loans and advances given to its
affiliates or there is a large equity infusion by its promoters
thereby augmenting its financial flexibility. Conversely, the
outlook may be revised to 'Negative' if the group extends further
funding support to its affiliate companies or there is a
significant deterioration in its capital structure on account of
large debt-funded capital expenditure.
Incorporated in 1999 as Suresh Overseas Commodities & Services
Trading Ltd, SPEL got its current name in 2005. SPEL is engaged in
film distribution and exhibition business. SPPL undertakes film
production and owns three film studios in Andhra Pradesh: two in
Hyderabad and one in Visakhapatnam.
* Moody's Sees Slump in Credit Quality for India's Oil Sector
-------------------------------------------------------------
Moody's Investors Service says the credit quality of state-owned
oil marketing and upstream oil companies in India will likely
weaken for the rest of FY2014 (April 2013--March 2014), if the
government continues to ask them, as it did in April-June, to
share a higher burden of the country's fuel subsidies.
"We now expect fuel subsidies for FY 2014 at INR1.4 trillion-
INR1.5 trillion, up from the INR1.3 trillion expected in June
2013," says Vikas Halan, a Moody's Vice President and Senior
Analyst.
Halan was speaking on Moody's just-released sector comment titled,
"Adverse Subsidy --Sharing Formula and Rupee Depreciation Will
Weaken Credit Quality of Indian Oil Companies ".
The report cites the ongoing depreciation of the Indian Rupee and
the rising crude oil prices as the reasons for the upward revision
of its fuel subsidy estimate for FY2014.
The Rupee has depreciated by about 10% and the crude oil prices
have increased by about 6% since the beginning of June. Moody's
projections for the subsidy total assumes that there will be no
material changes in either the Rupee exchange rate or the crude
oil price for the rest of FY2014.
Accordingly, in Moody's view, the fuel subsidy for July-September
2013 will likely rise to INR350 billion-INR400 billion as compared
to INR256 billion in April - June 2013.
"If the government continues with the same subsidy-sharing
formula, as in April-June quarter, then the credit quality of the
state-owned oil companies will weaken further," says Halan.
"However, in our base case scenario, we continue to expect the
government to fully reimburse marketing companies by the end of
FY2014 and reduce the burden on upstream companies," he adds.
According to the report, the total fuel subsidies actually
declined in April-June 2013, the first quarter of FY2014, but
because of the way the burden is shared out, the portion borne by
the marketing and upstream companies rose overall, while that by
the government fell.
The decline in fuel subsidy for the quarter was because of lower
crude oil prices and reforms in domestic diesel prices.
State-owned oil marketing companies, Indian Oil Corporation
Limited (IOC, Baa3 stable) and Bharat Petroleum Corporation
Limited (BPCL, Baa3 stable), and the upstream Oil and Natural Gas
Corporation (ONGC, local currency: Baa1 stable, foreign currency:
Baa2 stable) reported weak results for April-June 2013.
However, on a normalized basis -- after excluding the effects of
the fuel subsidies and foreign exchange losses -- EBITDA for both
IOC and BPCL improved from a year ago, owing to higher gross
refining margins and marginally higher sales volume.
Compared to April-June 2012, or the first quarter of FY2013, IOC's
EBITDA more than tripled to INR45.6 billion, while BPCL's grew 56%
to INR27.6 billion. IOC's EBITDA for the April -- June 2012
quarter was also affected by unusual amount of inventory valuation
losses.
For ONGC, after excluding one-off expenses relating to its
employee benefit scheme, EBITDA fell 11% from April-June 2012 to
INR97.3 billion.
This was mainly the result of a fall of about 13% in the net
realized price for its sales of crude oil.
====================
N E W Z E A L A N D
====================
GENESIS POWER: S&P Raises Rating on Capital Bonds to 'BB+'
----------------------------------------------------------
Standard & Poor's Ratings Services said that it has raised its
issue rating on Genesis Power Ltd.'s capital bonds to 'BB+' and
removed the rating from CreditWatch with positive implications
(where it has been placed on May 29, 2013), following completion
of the amendments initiated by the company in late May 2013 and
confirmation that NZ$200 million of capital bonds will remain in
circulation.
The upgrade reflects the amendments which, among other things,
replace the provisions that could have triggered an automatic
deferral of interest with a mechanism giving the company that
option. Further, with the confirmation that at least
NZ$200 million of capital bonds will remain outstanding, S&P will
treat the capital bonds as having an intermediate equity content
and it will therefore reclassify 50% of the capital bonds as
equity and 50% of the interest paid as dividend. S&P's equity
classification on the bonds remains greatly influenced by its
belief that the company is committed to maintaining an instrument
of this nature in its capital structure.
NELSON BUILDING: Fitch Affirms 'BB+' LT Issuer Default Rating
-------------------------------------------------------------
Fitch Ratings has affirmed the Long-Term Issuer Default Rating
(IDR) of Nelson Building Society (NBS) at 'BB+'. At the same time,
the agency has downgraded the bank's Support Rating to '5' from
'4', and the Support Rating Floor to 'NF' from 'B+. The Outlook is
Stable.
KEY RATING DRIVERS - IDR AND Viability Rating (VR)
The affirmation of NBS's IDR, VR and Stable Outlook reflect the
society's solid financial profile, which includes a strong funding
and liquidity position, an adequate level of capital and robust
asset quality. NBS's operating performance has been solid and
built on the back of a historically prudent approach to
underwriting.
NBS's loan book is fully deposit funded. The society's liquidity
position measured by a loans/deposit ratio at 82% at end-March
2013 (FYE13), and has been consistently stronger than peers.
Deposit growth accommodated strong loan growth during FY13, with
on-balance-sheet liquid assets of NZD83m (22% of total assets)
consisting mainly of interbank deposits.
NBS's loan portfolio grew by 14% year on year in FY13, of which
70% originated from the more recently established Takaka and
Ashburton branches. A solid regional presence and strong community
links allow NBS to compete on its service proposition and help
offset pricing pressure in the market. However, as a mutual
institution, NBS has limited capital raising options and rapid
loan growth has resulted in capital ratios trending lower.
Despite this rapid loan growth the society has maintained a
conservative underwriting approach, and this is reflected in its
pristine asset quality. At FYE13, NBS had no impaired loans, which
remains unchanged year on year, and well secured past due loans
had declined by 23% to NZD1.1m.
Intense lending competition could constrain loan growth and
profitability in FY14 although to-date NBS has handled this well.
Operating profits increased 6% to NZD2.1m as the society benefited
from wider net interest margins (FY13: 2.43%) in addition to loan
growth.
RATING SENSITIVITIES - IDR AND VR
NBS's IDR and VR are unlikely to be upgraded due to the society's
small absolute capital base, small domestic franchise, and
geographic and large-loan concentrations.
A negative rating action could occur if asset quality unexpectedly
deteriorated due to its large single-name or geographic
concentrations, or because of poorly managed expansion and loan
growth. Weaker capitalisation and damage to NBS's reputation and
franchise could have a knock on effect on deposits and threaten
the society's access to funding, possibly resulting in a rating
downgrade.
KEY RATING DRIVERS & RATING SENSITVITIES - SUPPORT RATING AND
SUPPORT RATING FLOOR
The downgrade of NBS's Support Rating and Support Rating Floor
reflect the introduction of the Open Bank Resolution Scheme (OBR)
from 1 July 2013 and the reduced propensity of the New Zealand
government to support. The OBR allows for the imposition of losses
on senior creditors to make up capital shortfalls where a deposit
taking institution has failed. The existence of a legal framework
in the agency's view makes it easier for the authorities to impose
losses than was previously the case.
The Support Rating and Support Rating Floor are sensitive to any
change in assumptions around the propensity or ability of the New
Zealand government to provide timely support to the bank.
The rating actions are:
Nelson Building Society (NBS):
Long-Term IDR affirmed at 'BB+'; Outlook Stable;
Short-Term IDR affirmed at 'B';
Local Currency Long-Term IDR affirmed at 'BB+'; Outlook Stable;
Local Currency Short-Term IDR affirmed at 'B';
Viability Rating affirmed at 'bb+';
Support Rating downgraded to '5'; and
Support Rating Floor revised to 'NF'.
SOUTHLAND BUILDING: Fitch Revises Support Rating Floor From 'B+'
----------------------------------------------------------------
Fitch Ratings has affirmed the Long-term Issuer Default Rating
(IDR) of Southland Building Society (SBS Bank, known as SBS). At
the same time, the agency downgraded the bank's Support Rating to
'5' from '4', and revised the Support Rating Floor to 'NF' from
'B+' following the introduction of New Zealand's Open Bank
Resolution Scheme (OBR).
KEY RATING DRIVERS - IDRS, Viability Rating (VR) AND SENIOR DEBT
SBS's IDRs, VR, senior debt ratings, and Outlook reflect its
improved balance sheet structure and resilient pre-impairment
operating profitability. The ratings also take into consideration
SBS's small domestic franchise, which is reflected in restrained
pricing-power as a result of prudent risk management and in turn
limits the bank's growth potential.
SBS's balance sheet structure benefits from improving asset
quality, better liquidity and funding positions. Capitalisation
remains adequate. SBS's balance sheet composition and
profitability could come under pressure if the bank compromises
underwriting standards to grow in more competitive and potentially
riskier markets such as Auckland. However, Fitch expects exposure
to Auckland to remain small. The agency does not believe SBS would
compromise asset quality for above system loan growth.
Fierce lending competition, mainly through pricing while
maintaining prudent underwriting practices, is the most likely
constraint to SBS's revenue generation in the financial year
ending 31 March 2014 (FY14). Therefore, cost management and
continuing improvements in asset quality are crucial to achieve
healthy operating profit growth which supports internal capital
generation.
SBS's capital ratios have strengthened resulting from a reduction
in risk-weighted assets (RWA) and increased retained earnings.
SBS's Fitch Core Capital ratio continued to improve to 12.95% at
FYE13 from 11.73% at FYE12. However SBS, as a mutual, has limited
options to raise capital. Fitch estimates the likelihood of
capital depletion as a result of faster RWA growth to be small.
SBS's firm funding and solid liquidity positions benefit from a
good regional franchise which in turn resulted in a fully deposit-
funded loan book and improved liquidity management. SBS has
continuously increased its proportion of on-balance sheet
liquidity which is held in highly liquid assets. In addition,
SBS's liquidity could be further boosted by available funding from
the central bank and committed facility lines, which have been
regularly tested. Wholesale funding remains a small portion of
SBS's total funding. It is well covered with liquid assets and
provides SBS with some diversification. Fitch believes a weakening
in these positions would most likely occur if the bank were to
grow excessively, a situation the agency considers unlikely given
the fierce loan competition environment and restrained loan
growth.
RATING SENSITIVITIES - IDRS, VR AND SENIOR DEBT
SBS's IDRs and VR are sensitive to a change in Fitch's assumptions
around New Zealand's operating economy, competitive market
environment and potential impact on SBS's business model. An
upgrade to the bank's IDRs, VR and senior debt rating is unlikely
but could occur if the bank was able to successfully grow its
balance sheet and generate stronger operating profits while
maintaining its strong balance sheet composition.
SBS's senior unsecured debt, such as deposit notes, has priority
over the bank's redeemable shares which are its main funding
source. As a result, Fitch rates SBS's senior unsecured debt one
notch above its IDR and VR, reflecting the small proportion of
these securities relative to SBS's redeemable shares. It has thus
been affirmed following the affirmation of SBS's IDR and VR. Its
ratings are sensitive to the same considerations that might affect
SBS's VR. However, should the amount of senior unsecured
instruments as a proportion of total liabilities increase to a
level where the cushion of subordination provided by SBS's
redeemable shares no longer warrant a one notch uplift, the rating
would be equalised with the IDR.
The IDRs, VR and senior unsecured debt ratings allow for some
deterioration in the operating environment as well as SBS's
balance sheet composition, but potential negative rating pressure
could occur if asset quality was affected by profit deterioration
and capital depletion. A significant worsening in SBS's funding
and liquidity structure could also lead to negative rating action.
KEY RATING DRIVERS & RATING SENSITIVITIES - SUPPORT RATING AND
SUPPORT RATING FLOOR
The revisions to SBS's Support Rating and Support Rating Floor
reflect the introduction of the OBR from 1 July 2013 and the
reduced propensity of the New Zealand government to support. The
OBR allows for the imposition of losses on senior creditors,
including redeemable shareholders, to make up capital shortfalls
where a deposit-taking institution has failed. The existence of a
legal framework in the agency's view makes it easier for the
authorities to impose losses than was previously the case.
KEY RATING DRIVERS & RATING SENSITIVITIES - SUBORDINATED DEBT
SBS's subordinated debt is rated one notch below its VR to reflect
the subordinated ranking of its investors. It has therefore been
affirmed due to the affirmation of SBS's VR. Its ratings are
broadly sensitive to the same considerations that might affect
SBS's VR.
The rating actions are:
Southland Building Society (SBS Bank):
Long-term IDR affirmed at 'BBB'; Outlook Stable;
Short-term IDR affirmed at 'F2';
Local Currency Long-term IDR affirmed at 'BBB'; Outlook Stable;
Local Currency Short-term IDR affirmed at 'F2';
Viability Rating affirmed at 'bbb';
Support Rating downgraded to '5' from '4';
Support Rating Floor revised to 'NF' from 'B+';
Commercial Paper affirmed at 'F2';
Long-Term senior unsecured debt (deposit notes) affirmed at
'BBB+'; and
Subordinated debt affirmed at 'BBB-'.
WAIRARAPA BUILDING: Fitch Affirms 'BB+' Issuer Default Rating
-------------------------------------------------------------
Fitch Ratings has affirmed the Long-Term Issuer Default Rating
(IDR) of Wairarapa Building Society (WBS) at 'BB+'. At the same
time, the agency downgraded the bank's Support Rating to '5' from
'4', and the Support Rating Floor to 'NF' from 'B+. The Outlook is
Stable.
KEY RATING DRIVERS - IDR AND Viability Rating (VR)
The affirmation of WBS's IDR, VR and Stable Outlook reflect the
society's improved operating performance, sound asset quality as a
result of prudent underwriting, good funding, modest on-balance-
sheet liquidity positions and adequate capitalisation.
Intense lending competition could constrain loan growth and
profitability in the financial year 2014 (FY14) although to-date
WBS appears to have handled these pressures well. Pre-impairment
operating profits increased by 29% to NZD347,000 in FY13 year on
year as the society benefited from wider net interest margins
(FY13: 2.12%) and modest loan growth of 3%. Moreover, new loan
growth has been solid through the first two months of FY14.
WBS's conservative underwriting approach is reflected in its sound
asset quality despite significant single name concentration. At
FYE13, WBS had no impaired loans, which remains unchanged year on
year, and well secured past due loans had declined by 17% to
NZD1.1m (1.3% of net loans).
WBS's loan book is fully deposit funded and the society's
loans/deposit ratio was a solid 100% at FYE13. The society's
liquidity position was well in excess of its trust deed
requirements at FYE13, although it consisted mainly of NZD18m in
committed facilities. On-balance-sheet liquidity was a more modest
NZD6.7m, and consisted of interbank deposits.
Capital ratios are high relative to peers but Fitch views this as
appropriate given WBS's small absolute capital base, limited
capital raising options, and large loan concentrations. Measured
by non-risk-adjusted total tangible equity/total tangible assets,
capitalisation increased slightly to 15.1% at FYE13 from 14.9% at
FYE12.
RATING SENSITIVITIES - IDR AND VR
WBS's IDR and VR are unlikely to be upgraded due to the society's
small absolute capital base, small domestic franchise, and
geographic and large-loan concentrations.
A negative rating action could occur if asset quality unexpectedly
declined leading to capital erosion. Damage to WBS's franchise
from a weaker capital position or operational risks could also
result in a rating downgrade. In addition, any reputational damage
could in turn impact deposits and threaten the society's liquidity
and access to funding.
KEY RATING DRIVERS & RATING SENSITVITIES - SUPPORT RATING AND
SUPPORT RATING FLOOR
The downgrade of WBS's Support Rating and Support Rating Floor
reflect the introduction of the Open Bank Resolution Scheme (OBR)
from 1 July 2013 and the reduced propensity of the New Zealand
government to support. The OBR allows for the imposition of losses
on senior creditors to make up capital shortfalls where a deposit
taking institution has failed. The existence of a legal framework
in the agency's view makes it easier for the authorities to impose
losses than was previously the case.
The Support Rating and Support Rating Floor are sensitive to any
change in assumptions around the propensity or ability of the New
Zealand government to provide timely support to the bank.
The rating actions are:
Wairarapa Building Society (WBS):
Long-Term IDR affirmed at 'BB+'; Outlook Stable;
Short-Term IDR affirmed at 'B';
Local Currency Long-Term IDR affirmed at 'BB+'; Outlook Stable;
Local Currency Short-Term IDR affirmed at 'B';
Viability Rating affirmed at 'bb+';
Support Rating downgraded to '5'; and
Support Rating Floor revised to 'NF'.
* Another Construction Firm Collapse in Christchurch Likely
-----------------------------------------------------------
Tamlyn Stewart at Stuff.co.nz reports that Christchurch might have
a construction company collapse like Mainzeal, an insolvency firm
said.
In a newsletter released on August 21, Stuff.co.nz relates,
McDonald Vague highlighted issues facing construction companies in
the Christchurch rebuild.
It said that when comparing the most common causes of construction
company failures with the problems facing firms in Christchurch,
there appeared to be "a high chance of another significant
construction company collapse," according to the report.
Stuff.co.nz relates that the warning follows City Care revealing
in the past week a dramatic drop in profit because of growing
rapidly in expectation of work that is slower in arriving than the
big city council-owned maintenance and construction firm
anticipated.
City Care has hired 706 staff; 393 people had left in the past
year.
According to Stuff.co.nz, McDonald Vague said the common causes of
construction firm failures included tight margins, insufficient
capital, lack of skills and experience, leaky buildings and non-
compliant construction, inability to manage growth, competition,
inaccurate estimates and tendering, and poor pricing decisions.
===============
P A K I S T A N
===============
* To Get More than $330MM Loan From IDB; Avoids Insolvency
----------------------------------------------------------
Razi Syed at Daily Times reports that there is no immediate threat
of insolvency to Pakistan as the country would get more than $330
million loan from Islamic Development Bank (IDB) by August 15,
2013, sources in the Ministry of Finance (MoF) said.
According to the report, an official of the MoF said an agreement
has been completed between Pakistan government and IDB some days
back under which Pakistan would get around $1 billion in four to
five tranches within a year to ease economic tension of the
country besides to become able to pay International Monetary
Fund's (IMF) loan under Stand-by Arrangements (SBA) facility by
September 2013.
Daily Times relates that currency experts relates that Pakistan
has to pay around $650 million to IMF under SBA facility by
September 2013 besides foreign exchange reserves stood within
$10 billion, putting pressure on the local currency.
Fazal Ahmad a currency expert in Houston through e-mail said this
IDB accord with Pakistan took place during Prime Minister Nawaz
Sharif's Saudi Arabia tour, according to the report.
Daily Times adds that Mr. Ahmad said this accord would also play a
significant role in saving Pakistan's falling economy and currency
against the dollar as the country would also get urea and
petroleum products worth more than $150 million in the coming
days.
This will ease the pressure on foreign exchange reserves besides
save cost incurring on petroleum products and payment of urea
imports, Mr. Ahmad, as cited by Daily Times, added.
====================
S O U T H K O R E A
====================
SK HYNIX: Solid Financials Prompt Moody's to Raise CFR to Ba2
-------------------------------------------------------------
Moody's Investors Service has upgraded the corporate family rating
of SK Hynix Inc. to Ba2 from Ba3. The rating outlook is stable.
Ratings Rationale:
"The upgrade reflects our expectation that SK Hynix's operating
and financial profile will remain solid, given the consolidation
of the Dynamic Random Access Memory (DRAM) industry and the
company's strategic focus on higher value-added products,
especially growing mobile DRAM," says Yoshio Takahashi, a Moody's
Assistant Vice President and Analyst.
After the completion of Micron Technology Inc.'s (Ba3 stable)
acquisition of Elpida Memory Inc. (unrated) on July 31, the top
three DRAM makers -- Samsung Electronics Co Ltd (A1 stable), SK
Hynix, and Micron -- will dominate the DRAM market with an
estimated combined market share of approximately 90%.
Given the industry's oligopolistic structure, competitive
pressures in the market will decrease, resulting in more balanced
supply and demand. The three DRAM makers will gain pricing power
and better manage their capacity additions.
In addition, SK Hynix's strategic focus on mobile DRAM will help
it maintain its revenue and earnings growth.
The growth in smartphones, as well as SK Hynix's customer base,
which includes a number of Chinese handset manufacturers, will
likely help it maintain the growth of its mobile DRAM business.
Unlike commodity-like PC DRAM, the contract conditions for higher-
value added mobile DRAM are more stable as they are produced to
orders and customized for each hardware manufacturer.
Accordingly, Moody's expects the reported quarterly operating
margins of SK Hynix to remain over 20% in 2H 2013. The company's
reported operating margins in 1Q 2013 and 2Q 2013 were 11% and
28%, respectively. Moody's expects the company to maintain an
operating margin of around 10% in 2014.
Given its solid earnings, SK Hynix is likely to generate positive
free cash flow (FCF) in the coming two years despite the large
capital requirements required for the memory business.
As a result, Moody's expects SK Hynix to maintain adjusted
debt/EBITDA in the 1.0x-1.5x range, adjusted EBIT/interest
expenses of 5x-10x, and adjusted debt/book capitalization below
35% in the coming 12-18 months.
SK Hynix's cash and cash equivalents of KRW2.4 trillion as of
June 30, and expected internal cash flow will likely be sufficient
to cover its capital expenditure and short-term debt of about
KRW2.0 trillion.
SK Hynix's rating reflects its strong market positions and
technological strength. At the same time, the rating takes into
consideration the inherent cyclicality of the memory chip
industry.
SK Hynix's Ba2 rating receives a one-notch uplift from its
standalone credit strength, owing to expected financial support
from SK Hynix's largest shareholder, SK Telecom Co Ltd (SKT, A3
stable), in case of need.
The stable outlook reflects Moody's expectation that SK Hynix will
maintain its solid operating and financial profile, given its
strong market position in the consolidated DRAM industry and its
strategic focus on higher-value added products. Moody's also
expects the company to maintain its strong liquidity profile.
Upward rating pressure could arise if SK Hynix (1) significantly
improves its position in the memory market; (2) diversifies its
customer base and products; (3) reduces the volatility of its
earnings; and (4) maintains its prudent investment and financial
policy, such that it maintains its operating margin above 10%,
adjusted FCF/debt above 15%-20%, and adjusted debt/EBITDA around
1.0x, over the course of a cycle.
Downward rating pressure could arise if SK Hynix's financial
metrics deteriorate owing to (1) a significant industry downturn;
(2) rapid commoditization of mobile DRAM; (3) a significant
erosion of its market positions or delay in technological
migrations; or (4) changes in its investment and shareholder
distribution policies, such that its operation margin and adjusted
FCF/debt become negative or if its adjusted debt/EBITDA rises
above 2.5x, on a sustained basis.
In addition, an adverse change in the relationship between SK
Hynix and SKT could result in a negative rating action.
The principal methodology used in this rating was Global
Semiconductor Industry Methodology published in December 2012.
Other Factors used in this rating are described in Rating Non-
Guaranteed Subsidiaries: Credit Considerations In Assigning
Subsidiary Ratings In The Absence Of Legally Binding Parent
Support, published in August 2003.
SK Hynix Inc., based in Korea, is engaged in the design,
manufacture, and sale of memory chips, such as DRAM and NAND flash
memory. It is 21.05%-owned by SK Telecom Co Ltd.
*********
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 ***