Moody's cuts True Corp family rating

Dylan Bushell-Embling
02 Dec 2013

Credit ratings agency Moody's has cut its rating for Thai operator True Corp, warning that the company is likely to have to continue borrowing to meet its capex requirements.

Moody's downgraded True's corporate family rating from B2 to B3, and also put all its credit ratings for the company on review for a possible further downgrade.

Moody's assistant vice president Yoshio Takahashi said the downgrade was prompted by True's sustained negative free cashflows, due to a combination of weak mobile earnings and high capex.

“As a result, we expect its financial and liquidity profiles to remain under pressure in the coming 12-18 months,” he said.

The company's negative free cash flow increased to 21 billion baht ($655.1 million) for the 12 months ending in September. With True needing to spend heavily on rolling out 3G and a 1.8-GHz 4G auction coming up in 2014, Moody's said it expects a similar negative FCF in 2014.

As a result, internal cash is unlikely to be enough to cover True's expected 25 billion-30 billion baht capex bill for the 12 months ending in September 2014, so it will likely need to continue to depend on borrowings from domestic banks and the bond market to cover the bills.

True's ratings outlook could stabilise if the company succeeds with plans for an infrastructure fund IPO, but delays in the approval process or in launching the fund could instead prompt Moody's to downgrade True's ratings further.

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