By Thanh Thuong - The Saigon Times Daily
HCMC – Local property developer Hoang Anh Gia Lai (HAGL) feels disgruntled by the credit-rating agency Fitch Ratings’ recent downgrade of its outlook to negative from stable.
HAGL deputy general director Vo Truong Son told the Daily that Fitch’s rating did not sufficiently reflect the actual situation of the company.
Fitch has also downgraded HAGL’s senior unsecured rating and its US$90-million bonds issued in Singapore in mid-2011 to B- versus the previous B, says a Reuters report.
Fitch said the new outlook reflects the higher credit risk faced by HAGL due to a sharp drop in property sales in HCMC. As a result, HAGL was saddled with completed, but unsold, inventory of VND3.5 trillion in end-2011.
In addition, the company’s net debt sharply surged to VND8.7 trillion at last year’s end from VND2.3 trillion in the preceding year, which far exceeded Fitch’s previous expectations.
According to Fitch, HAGL is addressing these problems but it is unclear whether the company’s efforts will be sufficient to prevent further declines in the its financial capability, especially the convertible bonds worth VND1.1 trillion that will fall due in August next year.
The outlook rating may be upgraded to stable again only when HAGL has reduced its property inventory and the iron ore and hydro power projects start to make meaningful contribution to the company, said the agency.
However, Son stressed: “Fitch relied only on the book values of assets to calculate the debt recovery capacity ratio… HAGL’s rubber farms and land usually have higher market values than those on the book, but Fitch hasn’t taken this factor into account. Furthermore, it is unreasonable that Fitch has discounted values of these assets.”
Son said although HAGL had provided data proving its property inventory is incomplete, but Fitch still insisted that they are “completed but unsold”.
The incomplete inventory of HAGL includes Block 5 of the first phase of the Phu Hoang Anh project and the An Tien project that have been sold and will record revenues in this year’s first and third quarter respectively, along with other projects to be offered soon like the second phase of Phu Hoang Anh, Thanh Binh and Hoang Anh Incomex.
With the advantage of low costs, HAGL can easily offer these projects to the market to recover capital. However, HAGL is not under sell-off pressure as it believes the lending rates will be lowered thanks to the efforts of the Government and the central bank, said Son.
He said HAGL still has over VND2.8 trillion available to invest in more projects.