Fitch Rtgs: No Immediate Rating Impact on Polyplex Thailand from Penalties

Stocks and Financial Services Press Releases Friday April 26, 2019 17:49
Bangkok--26 Apr--Fitch Rtgs

The ratings on Polyplex (Thailand) Public Company Limited (PTL; A-(tha)/Stable) are unlikely to be immediately affected by penalties imposed by the regulator on the directors and executives of PTL and its major shareholder, Polyplex Corporation Limited (PCL), for insider trading, Fitch Ratings says. The civil sanctions should not significantly impair PTL's operations, while the financial impact of the penalties is small relative to PCL's cash flows.

The violation of the Securities and Exchange Commission of Thailand's (SEC) regulations relates to the use of inside information by the major shareholder to purchase PTL's shares in 2016. The findings by the SEC reflect poorly on PTL's corporate governance, in particular, the effectiveness of its board and management. This may constrain or negatively affect PTL's rating if not remedied. Fitch will monitor the steps that PCL and PTL will take to prevent re-occurrence. PTL's board of directors held a meeting on 22 April 2019 to discuss the matter and take action to prevent any adverse impact on the company's operation.

The SEC is also considering banning three directors and two executives of PTL from holding positions of director and executive of any securities issuing company and listed company in Thailand. Further action will be taken in due course. PTL's operations have been controlled by PCL through the board of directors and commonality of their management teams. Four out of eight members of PTL's board are from PCL, and key senior managers of PTL, including the managing director, are seconded from the PCL's group.

Directors and executives of PTL, PCL and Polyplex (Asia) Pte. Ltd. (PAPL), a wholly owned subsidiary of PCL, are required to pay fines and PAPL is also required to return the benefits from insider trading totalling THB53 million, which is very small relative to PCL's operating cash flows. PCL had cash and cash equivalents of INR7.8 billion (THB3.6 billion) on a consolidated basis at end-March 2018. PTL has relied quite heavily on short-term debt from financial institutions to finance its working capital, although it has good relationships with several banks. The deterioration of the banks' confidence in the company would increase PTL's refinancing risk.

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