Fitch Downgrades MINT’s Debenture, Dragging BBL Down as a Guarantor, NH Clouded Earnings

Fitch Ratings has downgraded MINT’s USD300 million guaranteed senior perpetual capital securities to ‘BBB’ from ‘BBB+’ due to the impact of the coronavirus outbreak. The downgrade also affected BBL, as a guarantor, while MINT is expected to pay higher interest rate and privilege for new buyers.

 

On April 30, 2020, Fitch Ratings downgraded Minor International Public Company Limited’s (MINT) USD300 million guaranteed senior perpetual capital securities to ‘BBB‘ from ‘BBB+’ due to the impact of the coronavirus outbreak.

The downgrade of the debentures’ rating follows the downgrade of the Long-Term Issuer Default Rating (IDR) on Bangkok Bank Public Company Limited (BBL) as a guarantor from BBB+ to BBB on May 2, 2020, mainly due to the coronavirus outbreak that halted the economy, which was expected to impact the overall outlook of the banking sector.

The total guarantee amount from BBL is limited to a maximum of 120% of MINT’s issued debenture, which includes the principal money and interest according to the condition of the debenture.

 

According to Fitch Ratings, the first call date will be in 2021, while the company issued the perpetual bond on September 28, 2018, with an interest rate of 5.81% per year, paid biannually.

In this regard, the maturity date is expected to be on September 28, 2021, and the downgrade will cause the company to pay higher interest rate and privilege for new buyers. As of the ending of 2019, MINT had perpetual bond in a total amount of 24,822 million baht with 1,312 million baht of paid interest.

 

The company holds 94.1% stake in NH Hotel Group (NH), a multinational hotel company headquartered in Madrid, that operates over 350 hotels in 28 countries. NH is expected to receive a huge impact from the coronavirus outbreak in Europe, and the negativity would reflect MINT’s 1Q20 earnings, as a major shareholder.

 

Maybank Kim Eng estimated a decline of 79% in MINT’s 2020 profit from 10,697 million baht in 2019 to 1,500 million baht in 2020 mainly due to the coronavirus outbreak and the adjustment of TFRS 16.

MINT has an Interest Bearing Debt Ratio at 2.2x (including perpetual bond in the calculation), which is one of the main concerns for MINT. However, the company might be able to overcome the crisis if the virus outbreak ends within 2020.

Maybank expected MINT to report an EBITDA at 15,000 million baht, compared to its normal level at 23,000 million baht in 2019, which would be sufficient for paying 4,800 million baht of interest. Moreover, MINT has a cash on hand a total of 13,300 million baht, higher than its 9,700 million baht of debt expected to be paid this year.