Nov 1 2013, 11:40 PM
QUOTE(davinz18 @ Nov 1 2013, 08:51 PM)
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S&P: IOI Corp purchase of Unico-Desa marginally negative for financial risk profile [/b]
Standard & Poor's Ratings Services says IOI Corp. Bhd’s purchase of Unico-Desa Plantations Bhd is likely to be marginally negative for IOI's financial risk profile.
It said on Friday the company's ratio of adjusted debt to EBITDA would exceed 2.5 times for about a year at least following the acquisition.
“This compares with our downgrade trigger of more than 2.75 times on a sustained basis. We expect the ratio to improve over a longer term as IOI will likely generate positive free operating cash flows and repay debt using internal cash accruals,” it said.
S&P said in arriving at IOI's adjusted debt, it had set aside RM3.0bil cash, which the company needs for its operations, from IOI's expected cash balance. It set off the rest of the cash against the company's debt.
To recap, IOI has acquired a 39.55% stake in Unico-Desa for RM396.63mil. IOI's mandatory general offer for the remaining stake would entail a payout of about RM600mil. IOI plans to use internal cash accruals to fund the expenditure.
S&P said IOI Corp's proposed acquisition of palm oil producer Unico-Desa Plantations does not affect the ratings and outlook on IOI (BBB/Stable/--; axA/--) and the notes it guarantees.
The ratings agency said it does not expect Unico-Desa to contribute significantly to IOI's cash flows over the next one to two years.
It added Unico-Desa's operating parameters, such as production of fresh fruit bunches per hectare and oil extraction rates, were comparable with industry benchmarks.
“We do not anticipate that IOI will meaningfully improve them over the next one to two years. Unico-Desa will marginally augment IOI's planted area and in-house crude palm oil supply. The acquisition is likely to be marginally negative for IOI's financial risk profile,” it said.
S&P also said it expected IOI to receive about RM2bil as part of a proposed demerger of its property business.
“We understand that the proposed reorganisation is progressing as we expected and is likely to be completed over the next two to three months,” it said.
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S&P: IOI Corp purchase of Unico-Desa marginally negative for financial risk profile [/b]Standard & Poor's Ratings Services says IOI Corp. Bhd’s purchase of Unico-Desa Plantations Bhd is likely to be marginally negative for IOI's financial risk profile.
It said on Friday the company's ratio of adjusted debt to EBITDA would exceed 2.5 times for about a year at least following the acquisition.
“This compares with our downgrade trigger of more than 2.75 times on a sustained basis. We expect the ratio to improve over a longer term as IOI will likely generate positive free operating cash flows and repay debt using internal cash accruals,” it said.
S&P said in arriving at IOI's adjusted debt, it had set aside RM3.0bil cash, which the company needs for its operations, from IOI's expected cash balance. It set off the rest of the cash against the company's debt.
To recap, IOI has acquired a 39.55% stake in Unico-Desa for RM396.63mil. IOI's mandatory general offer for the remaining stake would entail a payout of about RM600mil. IOI plans to use internal cash accruals to fund the expenditure.
S&P said IOI Corp's proposed acquisition of palm oil producer Unico-Desa Plantations does not affect the ratings and outlook on IOI (BBB/Stable/--; axA/--) and the notes it guarantees.
The ratings agency said it does not expect Unico-Desa to contribute significantly to IOI's cash flows over the next one to two years.
It added Unico-Desa's operating parameters, such as production of fresh fruit bunches per hectare and oil extraction rates, were comparable with industry benchmarks.
“We do not anticipate that IOI will meaningfully improve them over the next one to two years. Unico-Desa will marginally augment IOI's planted area and in-house crude palm oil supply. The acquisition is likely to be marginally negative for IOI's financial risk profile,” it said.
S&P also said it expected IOI to receive about RM2bil as part of a proposed demerger of its property business.
“We understand that the proposed reorganisation is progressing as we expected and is likely to be completed over the next two to three months,” it said.
This post has been edited by spring onion: Nov 1 2013, 11:40 PM
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