Crown mulls loan as market deteriorates

The logistics and moving company may turn to the loan market following the continued deterioration of the bond market.
Crown Worldwide, the logistics and moving company, is mulling over its next course of action after BNP Paribas and Standard Chartered reported investor feedback to the company on Friday.

ôInvestors like the credit but they are not willing to commit in these markets, especially after the disappointing pay-roll numbers out of the US on Friday which saw the bond market open still weaker this week,ö says a source close to the deal. ôTiming-wise, this isnÆt the best time to bring a deal to market, but itÆs up to the client to decide which way it wants to go.ö

The iTRAXX Asia ex-Japan high-yield index has widened to a new all-time high of 634bp, from Friday's close of 594/605bp ahead of the US jobs data, according to Reuters.

Crown, rated Ba2 by Moody's, is now contemplating whether to pay up and go ahead with a bond in order to achieve the investor diversification it is looking for, or to opt for a loan instead and achieve considerably tighter pricing. Either way, a deal of some sort will take place since the company reportedly needs to raise $85 million in total for refinancing purposes. "The company wants to diversify, but won't pay unfair levels," says a source.

A source not involved in the deal believes very few issuers would be willing to brave the market in this environment.

Crown is well-known to investors in the region for its records management and relocation and moving businesses. In 2007, it posted revenues of HK$2.89 billion ($370 million). The companyÆs management profile is moderate with adjusted debt-to-Ebitda of four times as of December 2007, according to a credit research report. Deleveraging is unlikely in 2008 and 2009. Although annual capex requirements are forecast to be much higher this year and in 2009 (up from HK$244 million), steady cash flows from the record management business and a strong position in the relocations and moving segment should help maintain leverage and coverage ratios, continues the report. The record management business represented 24% of revenues and 53% of Ebitda in 2007, while the relocations and moving segment accounted for 68% of revenues and 43% of Ebitda.

But if the markets stabilise, could Crown be a contender for opening the high-yield market? ôCrown has a good credit story, but I think that JG Summit is the strongest contender,ö says a syndicate banker.

JG Summit, the Philippines conglomerate rated B+ by Standard and PoorÆs, embarked on a roadshow in January for a potential deal managed by Credit Suisse and Deutsche Bank. The roadshow revealed that funding levels were wider than its target.

ôIf the company was willing to stomach the cost of funding, it would benefit from a very strong domestic investor base familiar with the credit,ö says a syndicate banker. ôThe company has a strong balance sheet and is a relatively seasoned borrower having done a number of deals for the last few years. I donÆt believe a debut borrower like Crown can open the market right now.ö

JG summitÆs last foray into the market was in 2006 when it priced a $300 million bond via sole-lead Credit Suisse.

Meanwhile, rumours are circulating that PT Truba Alam Manunggal Engineering, an Indonesian contracting company, might also be contemplating a high-yield deal via BNP Paribas. However, a source close to the transaction, says the roadshow taking place in Hong Kong and Singapore this week is no more than a credit update on the back of the companyÆs earnings announcement. The earnings report was solid, with profits jumping six-fold to Rp214 billion ($23.7 million) last year, and sales rising 55% to Rp1.5 trillion, according to Bloomberg.

Other companies have hit the road recently, namely KoreaÆs GS Caltex and Hyundai Steel but both purely for the purpose of ôinvestor updatesö, insist sources.

Furthermore, those offshore issuers who planned to raise funds in the ringgit market may have hit a rough patch. Malaysian stocks plummeted 10% yesterday following the elections upset which saw the ruling coalition suffer its heaviest set-back in 50 years. Specialists will watch the local markets closely during the next two days, with the expectation that they will recover.
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