Fitch lowers Eastern Broadcasting

Fitch Ratings said it downgraded the ratings of Eastern Broadcasting Co., Ltd. and placed them on Rating Watch negative. The issuer's long-term foreign- and local-currency issuer default ratings were downgraded to BB- from BB, national long-term rating to BBB(twn) from BBB+(twn) and national short-term rating to F3(twn) from F2(twn).

The ratings of the NT$50 million and NT$300 million senior unsecured domestic bonds due June and July 2008, respectively, were downgraded to BB- from BB and to BBB(twn) from BBB+(twn).

The downgrades reflect the company's weaker-than-expected operating performance and credit metrics and Fitch's expectation that it could be constrained by reduced access to credit facilities from financial institutions because of bid rigging, embezzlement and fraudulent payment by company executives, the agency said. The company's net adjusted debt-to-EBITDAR ratio grew to 2.9 times at the end of 2006 from 2.6 times in 2005.

Fitch also said that the company is generating steady cash flow and that it has embarked on a corporate restructuring process, which includes closing some overseas operations and disposing its office buildings, as well as adopting a more conservative policy in capital spending and capital structure.

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