'Significant uncertainty' over G Steel's liquidity: Moody's
Moody’s Investors Service has given a bleak outlook for Thailand’s second-largest hot rolled coil producer, G Steel Public Co, as it downgrades the company’s credit ratings due to “significant uncertainty over G Steel’s current liquidity position.”
Based on end-December 2008 financial statements, G Steel’s external auditors have raised several concerns, including the quality and quantity of allowances provided on the company’s outstanding trade receivables, says Moody’s in a statement seen by Steel Business Briefing.
G Steel had trade receivables of THB 3,957m ($110m) outstanding as at 31 December. Of this, THB 3,582m pertained to three unrelated parties, had incomplete documentation for sales authorisation, lacked evidence of delivery of goods, and did not have signatures acknowledging receipt of goods. The uncertainty of collection of these trade receivables will exacerbate the company’s already poor liquidity and its access to bank funding will be constrained, says Kathleen Lee, a vp with Moody’s.
Moody’s also raised concerns over future losses at G Steel in view of committed higher prices for its consigned or purchases of raw materials versus current market prices. It notes G Steel’s operating environment remains challenging over the medium term and its weak liquidity position. G Steel's near-term financing risk is evident from its scheduled semi-annual loan maturities in 2009, which do not have the support of available committed facilities.
Moody’s downgraded the corporate family rating and senior unsecured ratings of G Steel to Caa3 from Caa1. G Steel officials were unavailable for comments.
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