GITI arranging US$225 million loan

Six banks have reportedly agreed to support a Deutsche Bank-arranged US$225 million 3.5-year term loan for China’s GITI Tire. According to Thompson Reuters’ ifre.com website, unnamed banking sources shared the information with the publication. No details of what the loan is intended for have yet been released, but it looks likely to be a refinancing tool. GITI has not officially commented on the reports.

Earlier reports published on 4 June said that around 12 banks attended a site visit the week before to GITI Tire’s operations. Back then the news site was saying GITI Tire was in the market for a US$225 million loan via sole bookrunner Deutsche Bank. Another report released in May said the facility has a “door-to-door tenor of 3.5 years and an average life of two years.” The loan, originally scheduled to be sealed up at the end of May, as the estimated to close mid-June and now looks more likely to be July or August.

S&P puts B rating on GITI credit

On 9 June Reuters reported that credit agency Standard & Poor’s had placed China-based GITI Tire Pte. Ltd. on its ‘B’ long-term corporate credit rating and ‘cnBB-‘ Greater China scale with “negative implications” because of “uncertainty over the refinancing of the company’s senior secured notes maturing in January 2012.” At the time of the report GITI had not obtained committed funding to refinance its US$200 million bond maturing in January 2012.

At the same time, Standard & Poor’s placed ‘CCC+’ issue rating on GITI’s US$200 million 12.25 per cent senior secured notes on CreditWatch with negative implications, and lowered its Greater China scale issue rating to ‘cnCCC+’, from ‘cnB’, before placing it on CreditWatch with negative implications.

“We have placed the ratings on CreditWatch because of the uncertainty on the notes refinancing but we understand that the company is currently trying to arrange refinancing,” said Standard & Poor’s credit analyst Xavier Jean.

According to the report, the rating on GITI reflects the company’s “highly leveraged financial risk profile, weak liquidity, limited financial flexibility, above-average industry risk, and intensified margin pressure. A leading market position in China, geographic diversity, and established distribution capabilities partly offset these weaknesses.”

Standard & Poor’s reportedly expects to resolve the CreditWatch placement within the next three months when further details of the firm’s refinancing are made available, however this could potential result in either positive or negative repercussions: “We may lower the rating on GITI by one notch or more if GITI has not obtained committed funding we deem sufficient to refinance the US$200 million notes due January 2012 within the next three months,” Xavier Jean said.

The analysts also said the may downgrade the company if its linkage with Indonesia’s PT Gajah Tunggal Tbk. triggers any “material contingent liability for GITI, or if “GITI introduces further aggressive shareholders’ capital return initiatives or other related-party transactions that substantially weaken its ability to service debt.”

However, S&P’s representatives also said they may remove the rating from CreditWatch if GITI obtains sufficient additional financing within the next three months, which it seems likely this latest refinancing exercise is designed to do.

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