The rating action follows the agency’s placement of Tesco PLC’s (Tesco) Long-Term Foreign Currency Issuer Default Rating (IDR) of ‘BBB’ on RWN on 22 September 2014. For further details, please see “Fitch Places Tesco on Rating Watch Negative”, published on 22 September 2014 and available at www.fitchratings.com.
Key Rating Drivers
Guarantee from Tesco: The rating on ECDS’s guaranteed debentures is based on the full and irrevocable guarantee provided by Tesco, a majority shareholder of ECDS.
Limitation on Sovereign Intervention: Tesco would not be liable to pay this guarantee in case of 1) expropriation or nationalisation of 10%, or THB5bn, or more of the issuer’s consolidated fixed assets, or with effect of preventing the issuer and its subsidiaries from pursuing their ordinary course of business; or 2) sovereign intervention preventing the issuer from transferring monies or converting foreign currency to pay the obligation under the debentures, or causing Tesco to lose its status as the majority or controlling shareholder.
Resolution of RWN: The RWN on the rating on ECDS’s guaranteed debentures will be resolved once the RWN on Tesco’s Long-term IDR is resolved.
Rating Sensitivities
Positive: Future developments that may, individually or collectively, lead to positive rating action include:
- An upgrade of Tesco’s rating.
Negative: Future developments that may, individually or collectively, lead to negative rating action include:
- A downgrade of Tesco’s rating.
It should be noted that a one-notch change in an International rating could result in a change in a National Rating of more than one notch.