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Moody’s sees no impact on IOI’s ratings from equity offering

Mon, 27 Jul 2009 18:18:30 +0000

Singapore, July 27, 2009 -- Moody's Investors Service sees no rating
impact from IOI Corporation Berhad's (IOI) announcement of a proposed
equity offering in the form of a renounceable rights issue for a gross
amount of RM1.22 billion.

IOI ratings are Baa1 with negative outlook.

The proposed renounceable rights issue -- still subject to approval from
shareholders and regulators -- will take around three months to complete.
The proceeds will be used for planned capital expenditures, potential
investments, debt repayments and working capital purposes for the next
two years.

"The cash injection from the potential rights issue, if completed, will
lead to an improvement in IOI's liquidity profile, but it will not be
significant enough to change the current rating and its outlook," says
Kathleen Lee, a Moody's VP/Senior Analyst.

"Moody's considers that in the context of challenging conditions in the
palm oil and property markets in Malaysia and Singapore, improvements
instead in profitability and a reduction of net exposures to derivatives
would have relatively more impact on its current ratings outlook," says
Lee, also Moody's lead analyst for the company.

The last rating action with regard to IOI was taken on 2 March, 2009,
when the outlook for the company's issuer and debt ratings were changed
to negative from stable.

IOI's ratings have been assigned based on factors that Moody's believe
are relevant to the risk profile of IOI, such as the company's (i)
business risk and competitive position compared with other firms within
the industry; (iii) capital structure and financial risk; (iii)
projected performance over the near to intermediate term; and (iv)
management's track record and tolerance for risk. These attributes were
compared against other issuers both within and outside IOI's core
industry; IOI's ratings are believed to be comparable to those of other
issuers of similar credit risk.

IOI Corporation Berhad is headquartered in Malaysia and listed on Bursa
Securities Malaysia. The company is involved in oil palm plantations and
resource-based manufacturing, including olechemicals, as well as
specialty oils and fats. It is also a property development and investment
group.

Moody’s says Asian bank single-client exposures above N America

Thu, 25 Jun 2009 19:37:02 +0000

Singapore, June 25, 2009 -- Moody's Investors Service says that its recent
survey of single-client exposures at banks in Asia (ex-Japan) shows their
credit portfolios as significantly more concentrated than those in North
America.

"Such higher concentrations are due mainly to the region's banks
demonstrating greater importance -- as opposed to North American
institutions -- to the financing needs of their business communities,
given the less-developed state of the financial markets in which they
operate," says John Tham, VP/SCO and author of the report for Moody's
financial institutions group in Asia Pacific.

"The Moody's granularity survey for Asian banks sought to identify the
large credit exposures which represent potential sources of volatility in
earnings and asset quality, and therefore are important considerations
when assigning ratings," says Tham.

"In terms of methodology, it was similar to those conducted before in
North America, and specifically in Asia, it involved comparing the banks'
20 largest exposures and 20 largest exposures rated below A3 (or Moody's
equivalent) to their core earnings (pre-tax pre-provision profits, or
PPP), equity and tangible common equity (TCE)," adds Tham.

Moody's approach of comparing large exposures against PPP is consistent
with its traditional view that core earnings -- rather than capital --
are the first line of defense against losses. However, Moody's further
recognizes that reviewing large exposures to capital is also important
because earnings can be impacted by non-recurring items.

According to the data from the survey, median single-client exposures in
2008 appeared to be rising, particularly when measured against core
earnings. While there were higher exposures in some instances, PPP was
also generally lower.

If debt market conditions weaken again after their recent improvement,
larger corporations could be channeled back to the banks, particularly
local institutions as a number of foreign banks rein in lending -- or
exit Asia -- to preserve capital.

Moreover, the Moody's survey highlights that increases in credit
exposures would need to be carefully balanced with PPP, capital levels
and robust risk management.

The findings also show that stronger banks typically have smaller exposure
concentrations to borrowers rated below A3, although Moody's notes that
lenders in riskier and therefore lower rated operating environments
seldom have the luxury to finance groups rated single A or better.

Furthermore, the survey results illustrate that the large- (US$35-99bn)
and medium-sized banks (US$10-34bn) have higher concentrations than the
very large (>US$100bn) and small banks (www.moodys.com.

Moody’s sees negative industry outlook for Australia/NZ banks

Tue, 23 Jun 2009 16:21:43 +0000

Singapore, June 23, 2009 -- Moody's Investors Service says that its
industry outlook for banking systems in Australia and New Zealand is
negative, reflecting the impact of the slowdowns in global and domestic
economies, but both systems also remain robust.

"The slowdowns are clearly making themselves felt on the performances of
banks in Australia and New Zealand, but the systems in both countries
remain very sound," says Jerry Chien, MD for Moody's Financial
Institutions Group in Asia Pacific. By contrast, ratings outlooks vary,
between stable and negative.

Chien was speaking on the release of Moody's latest annual Asian Banking
System Outlook, which covers 16 jurisdictions. The report is authored by
senior analysts with the Moody's Financial Institutions team.

The Australian financial system remains one of the world's most robust,
having largely escaped crisis-related losses, but credit costs are
mounting and loan volumes are contracting as economic weakness persists,
the report says.

While funding costs have risen as a result of the crisis and competition
for deposits is high, pre-provision bank margins are improving as the
banks are better able to price for risk

In the case of Australia, losses from the banks' retail exposures, which
typically comprise over half of total loans, are not likely to create the
same degree of stress as in other developed markets; rather it is
business / corporate sector performance that will likely remain the swing
factor for Australian bank asset quality.

While Australian banks' corporate exposures are skewed towards stronger
companies -- many of whom have recently raised capital -- single-name
concentration risk is relatively high, creating some sensitivity to
event risk.

In New Zealand, the banking system, as indicated, remains sound, despite
the challenges it faces. Customer deposits have grown faster than loans
so far in 2009, in stark contrast to previous years.

And regulatory developments continue to support financial system
stability, but the country has a weakening local economy that is
relatively small and narrow and makes it vulnerable to external shocks.

The property market has suffered a decline over the past year, with house
prices falling 9% in 2008, and as mortgage insurance is not common in New
Zealand, this leaves the banks exposed to property market reversals. That
said, the loan-to-value ratios of the rated banks indicate there is some
buffer for a fall in property prices before any loan loss materializes.

On the other hand, New Zealand corporate asset quality remains strong as
companies have de-geared in recent years. However, material stress is
appearing in the country's large dairy sector as a result of lower milk
prices and high leverage present in some recent farm conversions and
corporatisations. 

For Asia's banks as a whole, when looking at their prospects, the Moody's
report sees challenges in light of the severe and protracted nature of
the current global recession.

Indeed, the widespread presence of negative industry outlooks across the
banking systems covered by Moody's in the region reflects our basically
cautious stance over the next 12 months.

Moreover, while mildly positive macro-economic indicators and signs of a
stock market rebound have recently emerged, the unprecedented nature of
the financial crisis raises questions over the certainty of a swift
recovery.

Another significant uncertainty is whether the recent surge in wealth
across Asia can generate sufficient levels of consumption to compensate
for the lower demand from the US and other developed economies,
traditionally the significant buyers of Asia's goods.

But it is also important to note the significant steps taken since the
Asian financial crisis and the fact that standards for accounting,
transparency, governance, risk management and regulation have all
improved markedly throughout the region.

Thailand and Singapore agree to speed up economic cooperation

Mon, 22 Jun 2009 18:25:25 +0000

BANGKOK, June 22 (TNA) - Thai Prime Minister Abhisit Vejjajiva and his Singapore’s counterpart Lee Hsien Loong on Monday agreed to speed up bilateral economic cooperation.

Speaking during a one-day visit to Singapore, the Thai prime minister said both governments agreed to expedite economic, social and security cooperation under existing bilateral frameworks.

Economic cooperation would also take centre stage at the Singapore-Thailand Enhanced Economic Relations (STEER) meeting aimed at promoting trade and investment of both countries.

The meeting is to be held in Singapore late this year.

The Thai premiere also said both Thailand and Singapore would join forces in strengthening the role of the Association of Southeast Asian Nations (ASEAN). The cooperation also included regional development, particularly trainings in Cambodia, Laos and Myanmar.

Mr. Abhisit said the Thai government had solved a number of problems and supported trade liberalisation.

The Thai premiere was confident his government’s new round of stimulus measures would attract more investment to Thailand.

“We’d like to see growth back in positive territory by the end of the year. And maybe something like 2 percent growth next year,” said the Thai prime minister. (TNA)

PM: Ready to resign after solving political, economic problems

Mon, 22 Jun 2009 17:46:26 +0000

SINGAPORE, June 22 (TNA) – Visiting Thai Prime Minister Abhisit Vejjajiva said on Monday he is willing to step down after solving political turbulence and economic problems in the country and completing his chairmanship of the Association of Southeast Asian Nations (ASEAN).

Speaking to business executives during his one-day official visit to the island nation, Mr. Abhisit said a general election would be held after the three primary problems are settled.

“It’s not difficult to dissolve the House and return power to the people,” the prime minister said.

Mr. Abhisit will complete his ASEAN chairmanship at the end of this year.

Reasserting that the overall situation in Thailand is quite peaceful now, the prime minister said his government still must more quickly resolve the political, economic and southern insurgency problems so that “peace can return to the country.”

He said his government has issued two programmes of economic stimulus measures which he is confident will turn the economy around to reenter positive performance in the fourth quarter this year.

The government will boost tourism and public utilities and Thailand will remain the world’s largest food exporter, Mr. Abhisit said.

Mr. Abhisit was scheduled to hold talks with his Singapore counterpart Lee Hsien Loong, pay a courtesy call on President S.R. Nathan and confer with Minister Mentor Lee Kuan Yew, Singapore’s first prime minister, before returning to Bangkok late Monday. (TNA)

Moody’s affirms Vedanta’s ratings with stable outlook

Wed, 17 Jun 2009 14:10:24 +0000

Singapore, June 17, 2009 -- Moody's Investors Service has today affirmed
the Ba1 corporate family rating and Ba2 senior unsecured rating of
Vedanta Resources plc ("Vedanta"). The outlook on the ratings is stable.

The rating action follows the acquisition by Vedanta's subsidiary Sesa
Goa of the mining assets of the Dempo Group for US$368 million; Vedanta's
offer to increase its shareholding in Sesa Goa from 53.1% to 55% for
around US$120 million; and Vedanta's issuance of a $1.25 billion
convertible bond.

"The acquisitions at Sesa Goa level are relatively small in their actual
amounts as compared to the group's size, and are in line with the
company's strategy to increase its iron ore capacity while streamlining
the group structure by increasing shareholdings in those subsidiaries
that it does not fully own," says Ivan Palacios, a Moody's AVP/Analyst.

"Nevertheless, the announced acquisitions will reduce the company's
cushion within its current rating. These acquisitions add to an already
heavy expansion plan, which includes the acquisition of minority
interests in BALCO and Hindustan Zinc, the potential acquisition of
Asarco, and an ambitious capital expenditure program, of which US$7.6
billion is yet to be spent," says Palacios, also Moody's lead analyst for
the company.

In Moody's view, Vedanta's US$1.25 billion convertible bond issuance
improves the company's near-term liquidity profile. In addition, the
amount raised is in line with Moody's expectations when Vedanta was
downgraded to Ba1 in December 2008.

However, the convertible bond issuance and the drawings on the long-term
project finance that Vedanta has recently secured will together increase
the company's on-balance-sheet leverage -- which stood at US$5.1 billion
as of FY2009 -- and weaken its credit metrics.

"As a result of the aggressive expansion strategy, the incremental debt
funding and the expectation of weaker near-term performance due to the
challenging environment for base metals, Moody's believes that Vedanta's
key financial metrics could temporarily exceed the tolerance level set
for the rating", says Palacios.

"However, Vedanta's stable outlook is supported by the expectation that
its financial profile will strengthen again beyond FY2010, once the new
projects gradually come on-stream and start generating the expected
returns," adds Palacios.

The rating also assumes continued covenant compliance management by the
issuer. In this context, downward rating pressure could develop in the
event that weaker-than-expected profitability reduces significantly the
headroom under Vedanta's financial covenants.

Vedanta's stable outlook is underpinned by its strong liquidity profile,
and Moody's expectation of a progressive improvement in the company's
financial profile beyond FY2010. This is balanced against a very
challenging operating environment, as well as the risk of further
investments beyond the large amount already committed.

Moody's notes, however, that there is limited tolerance in the rating for
further debt-financed expansion plans or further weakness within the
operating environment for base metals.

Positive pressure on the rating could develop if 1) demand and price
levels for base metals stabilise; 2) the planned expansion projects start
generating the expected returns; 3) there is evidence of a stable and
sustainable business profile for the company; and 4) there is an
improvement in the company's complex structure.

The rating could see upward pressure once the company demonstrates a
sustainable ability to maintain the following financial metrics on a
consistent basis: CFO (less dividends)/Adjusted debt over 25% - 30%,
Adjusted Debt/ EBITDA below 2.5x -- 3.0x, and EBIT interest coverage
over 5.0x -- 6.5x.

Conversely, the ratings could come under downward pressure if 1)
Vedanta's profitability declines beyond Moody's expectations for FY2010;
2) it undertakes further acquisitions, investments or shareholder
remuneration policies that include incremental debt; or 3) it fails to
satisfactorily execute its expansion projects.

Credit metrics that Moody's would consider for a ratings downgrade include
CFO (less dividends)/Adjusted Debt below 15%, Adjusted Debt to EBITDA
exceeding 4x, or EBIT interest coverage declining to 3.5x or less on a
sustained basis.

The last rating action with regard to Vedanta was taken on March 10,
2009, when Moody's stated that Vedanta's proposed acquisition of Asarco
for US$1.7 billion could be accommodated within the company's Ba1 rating.

The principal methodology used in rating Vedanta was "Rating Methodology:
Global Mining Industry", which can be found at www.moodys.com in the
Credit Policy & Methodologies directory, in the Ratings Methodologies
subdirectory. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Credit Policy & Methodologies directory.

Headquartered in London, UK, Vedanta Resources plc is a metals and mining
company focusing on integrated zinc, alumina/aluminum and copper smelting
and refining and iron ore mining. Its operations are predominantly
located in India. It is listed on the London Stock Exchange and is 59.06
% owned by Volcan Investments Ltd.

Moody’s affirms CCT’s Baa2 ratings; outlook negative

Tue, 26 May 2009 03:16:19 +0000

Singapore, May 26, 2009 -- Moody's Investors Service has today affirmed
CapitaCommerical Trust's (CCT) Baa2 corporate family and Baa3 senior
unsecured debt ratings. The outlook on the ratings is negative.

This follows CCT's announcement that it is to launch a fully-underwritten
1-for-1 rights issue to raise approximately SGD828.4 million, and which
is scheduled to be completed in early July 2009. The proceeds are
expected to go towards debt retirement.

"The equity raising, if completed, is expected to materially improve
CCT's credit metrics to the extent that its Debt/EBITDA leverage ratio
falls to 7x - 8x (from 10x - 11x) and its EBITDA/Interest coverage
increases to 2.6x -- 2.9x range (from 2.0x to 2.2x). These metrics are
appropriate for the Baa2 corporate family rating," says Kathleen Lee, a
Moody's VP/Senior Analyst. 

"In addition, the equity raising will also enhance CCT's financial
flexibility, as the proceeds will address most of its 2010 refinancing
requirements. Meanwhile, the tight headroom of its Loan--to-Value and
EBITDA/Interest financial covenants in its banking facilities will also
be vastly improved," adds Lee, also Moody's lead analyst for the trust.

As a result of these enhancements, Moody's expects to revise the ratings
outlook to stable upon completion of the capital raising. Moody's remains
cautious of the weakness in CCT's operating environment, given the
deepening of the recession in Singapore and strong upcoming new office
completions from 2009 onwards. However, the stable outlook is underpinned
by the fact that the equity offerings would provide CCT with a cushion
against a potential asset devaluation of up to 35% (after a 10%
devaluation in 2Q09) before pressure on the ratings emerges.

The upward rating pressure is unlikely to occur over the next 12 to 18
months given the challenging operating environment.

Downward rating pressure would develop should the REIT's operating
performance disappoint, with EBITDA/Interest coverage staying below 2.5x
and Debt to EBITDA rising above 8x on a consistent basis.

The previous rating action with regard to CCT was taken on 3 March 2009
when the trust's corporate family rating was downgraded to Baa2 with a
negative outlook.

The principal methodology used in rating CCT was the Rating Methodology
for REITs and Other Commercial Property Firms, which can be found at
www.moodys.com in the Credit Policy & Methodologies directory, in the
Ratings Methodologies subdirectory.

Other methodologies and factors that may have been considered in the
process of rating this issuer can also be found in the Credit Policy &
Methodologies directory.

CapitaCommerical Trust is a Singapore-based REIT which invests in
commercial properties. As of 11 July, 2008, CCT owned a portfolio of
high-quality properties, mainly in Singapore's CBD, with a valuation of
approximately S$6.7 billion.