Fitch cuts Property Perfect to junk

Fitch Ratings said it downgraded the national long-term rating of Property Perfect plc's THB350 million secured debentures due February 2007 to BB+(tha) from BBB-(tha) and downgraded the national long-term rating of its THB450 million partially guaranteed debentures (50% guaranteed by TMB Bank plc) due February 2008 to BBB(tha) from BBB+(tha).

The outlook is negative.

The ratings downgrade reflect Property Perfect's worse-than-expected operating performance and a substantial deterioration in its financial leverage in 2006, which has reduced the company's financial flexibility and increased its refinancing risk, as well as the weakening operating environment for 2007, Fitch said.

The company's sales and EBITDA performance was very weak in 2006 due to the continued slowdown in overall housing demand, higher construction costs and intensified competition, the agency said.

Fitch said it believes the company now faces a tougher operating environment, including weaker demand and slower inventory turnover, which could continue to negatively affect its cash flow. Other key credit concerns include the company's liquidity management, although this is partly mitigated by its cash on hand of THB313 million and the remaining undrawn credit facilities of THB2.8 billion at the end of 2006.

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