S&P puts Panva Gas on negative watch

Standard & Poor's said it placed Panva Gas Holdings Ltd.'s BB+ long-term corporate credit rating and the BB+ issue ratings on Panva's $50 million convertible bonds due 2008 and $200 million senior unsecured notes due 2011 on CreditWatch with negative implications.

The rating actions reflect Panva's weakened financial profile as a result of two interest rate swap transactions, the agency said. The company reported a swap loss of HK$208 million for the year ended Dec. 31 after its derivative instruments were marked to market in line with new accounting practices.

S&P said the swap transactions have significantly increased the company's financial costs in 2006. For most of 2005, Panva's effective interest rates were much lower than the 8¼% coupon rate on its $200 million senior unsecured notes. On March 23, however, effective interest rates increased to about 15%.

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