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KOMSAN TORTERMVASANA
True Corp is preparing to float five billion baht worth of bonds in the fourth quarter to help refinance its outstanding debt.
Chief financial officer Noppadol Dej-udom said the telecom conglomerate would issue the debt by the end of the year in the local market.
The company faces five billion baht in debt coming due in 2009 and another 10 billion the following year.
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| In the picture Patrick Aronson, the country manager of Motorola Thailand, snaps a picture of a colleague as part of a demonstration of the company’s new line of mobile handsets at the Mobile Expo held over the weekend at the Queen Sirikit National Convention Center in Bangkok. |
"Before 2010 we will refinance our obligations again. To be on the safe side, we are looking at our options starting now," Mr Noppadol said.
Restructuring short-term liabilities will help free up needed cash flow to finance capital investment and potentially reduce the company's interest burden, which stood at 1.8 billion baht in the second quarter alone.
True also faces a major financing burden in mid-2009, when a call option comes due from last year's rights offering to the CP Group.
Bitco, the holding company parent of the cellular operator TrueMove, raised three billion baht in the offering. True Corp has the right to repurchase the 23% Bitco stake at the offering price of 0.50 baht per share plus 12% carrying costs.
True has petitioned CP to extend the call option by another year from the due date in July 2009. Another option is for True to spin off a stake in TrueMove or in its cable subsidiary, TrueVisions, to raise funds for the buyback payment. True holds 99% in TrueVisions and 76% of TrueMove.
True is the only domestic operator with a fixed-line, mobile, cable and internet operations, a position that company executives say gives it a clear competitive advantage.
But the price of True's expansion strategy has not been cheap - the company's debt level at the end of June was a staggering 110 billion baht, and its financial performance has lagged significantly behind that of its two larger competitors, Advanced Info Service and DTAC.
Debt repayments totalled two billion baht in the first half, while free cash flows rose 55% to 3.3 billion. Net profits totalled 65.89 million baht in the first half, compared with a loss of 282 million the year before, as capital expenditures dropped 1.3 billion baht year-on-year to 3.7 billion for the first six months.
Earnings before interest, taxes, depreciation and amortisation also fell 7.2% year-on-year to 9.6 billion baht, attributed largely to the impact of interconnection charges on TrueMove operations.
Mr Noppadol said financing costs for the company's debt burden ranged from 6% for online operations, 8% for cable TV to a high 11% for TrueMove.
TrueMove's debt burden includes 29 billion baht in borrowings raised through the issue of zero-coupon bonds due in 2013. "Even so, our operating cash flow remains strong. While market sentiment has certainly been affected by the US 'hamburger crisis', liquidity in the system remains quite good," Mr Noppadol said.
He expressed confidence that the company could raise funds if needed, thanks in part to True's successes in positioning itself as a household brand.
Shares of True closed on Friday at 3.04 baht, up four satang, in trade worth 281.78 million baht. The stock is down 55% over the past 12 months, underperforming the 29.9% decline in the broad market index.
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