Xinhua Finance Limited (TSE: 9399) Deems S&P Downgrade Unmerited
September 16 2007 - 11:29PM
PR Newswire (US)
SHANGHAI, China, Sept. 17 /Xinhua-PRNewswire-FirstCall/ -- Xinhua
Finance Limited (TSE Mothers: 9399; OTC ADRs: XHFNY) ("XFL", or the
"Company"), China's premier financial information and media
company, today indicated its disagreement with the rationale behind
the ratings downgrade announced last Friday by Standard &
Poor's ("S&P"). S&P lowered XFL's corporate credit rating
to "B" from "B+", while maintaining its stable outlook for the
Company. In its report, S&P lowered the rating "to reflect its
continued concern about the company's evolving corporate governance
issues, stabilization of the senior management team, and the
potential business impact of the negative media coverage of the
company since May 2007". Furthermore, S&P supports its
rationale with financial metrics that the Company believes have
been calculated in a manner that does not accurately reflect the
Company's operations. The Company believes S&P's downgrade is
not merited and remains confident in its creditworthiness. The
Company emphasizes that it is currently in full compliance with,
and in some cases exceeds, the corporate governance requirements of
the Tokyo Stock Exchange, and its subsidiary Xinhua Finance Media
("XFMedia"; Nasdaq: XFML) is in full compliance with NASDAQ and
Sarbanes-Oxley requirements. S&P also expressed concern over
recent senior management changes at the Company. Since June 2007,
there have been two departures of senior management at the Company,
XFL CFO, Gordon Lau and XFL Investor Relations Managing Director,
Sun Jiong. Neither of these management changes has compromised the
Company's earnings-generating ability as suggested by S&P since
these roles do not have direct impact on earnings-generation.
Senior management overseeing operations such as CEO and Founder,
Fredy Bush, COO, Daniel Connell, and President, Jae Lie, have been
with the Company for many years. Moreover, the Company has had in
place an effective succession planning process for changes in
senior management. Current XFL CFO David Wang worked alongside
Gordon Lau for more than six months before the departure to ensure
a smooth transition. Current Investor Relations Director Jennifer
Chan Lyman has been at the Company for more than three years,
worked with Sun Jiong for over a year and continues to manage the
Company's global investor relations program. XFL CEO Ms. Fredy Bush
said, "We understand the ratings agencies are under enormous
pressure at this time given the sub prime debt situation. However,
it does not merit unduly punishing companies with subjective rather
than objective criteria, based on innuendo rather than concrete
examples. The Company is in full compliance with all relevant
regulations, and the executive management team is strong and
producing better returns than the Company forecasted going into
this year, notwithstanding the misleading and inaccurate news
articles." With regard to the financial metrics cited by S&P,
the Company believes that the calculations behind the 11.6x of
total debt to EBITDA ratio from July 1, 2006 to June 30, 2007 and
the 1.1x EBITDA interest coverage ratio of for the first six months
of 2007 do not reflect the true financial condition of the Company.
S&P provides their methods for calculating EBITDA and total
debt in their report. For first half 2007 EBITDA, S&P excludes
US$3.3 million in non-cash Employee Stock Ownership Plan expenses,
non-operating cash income of US$2.7 million and US$4.2 million in
interest income. These cash-related items reflect the ability of
the Company to service its long term liabilities. Including the
items, the Company's first half 2007 EBITDA would be $18.7 million
and trailing twelve month EBITDA would be $30.8 million. As
clarified in their report, S&P's total debt for the company
includes finance leases of $117.3 million arising from XFMedia's
operating agreements and license agreements. Excluding these
finance leases, the Company's total debt would be $106.9 million
rather than $224.2 million. Based on the above, ratio of total debt
(including finance leases) to EBITDA from July 1, 2006 to June 30,
2007 is 7.3x and ratio of total debt (excluding finance leases) to
EBITDA is 3.5x. The EBITDA to interest coverage ratio 2.4x for the
first six months of 2007. The Company believes that these ratios
better reflect its true financial condition and debt-servicing
capability. Lastly, even using S&P's total debt figure of $224
million, the Company's net debt figure is at $28 million, based on
total debt of $224 million (which includes finance leases), less
consolidated cash on hand of $156 million and less US$40 million in
short-term note investments that mature in late October 2007. Ms.
Bush added, "Our business remains strong. We continue to leverage
the Company's unique position in China to pursue growth
opportunities and increase shareholder value." About Xinhua Finance
Limited Xinhua Finance Limited ("XFL") is China's premier financial
information and media service provider and is listed on the Mothers
Board of the Tokyo Stock Exchange (symbol: 9399) (OTC ADRs: XHFNY).
Bridging China's financial markets and the world, Xinhua Finance's
proprietary content platform, comprising Indices, Ratings,
Financial News, and Investor Relations, serves financial
institutions, corporations and re-distributors worldwide. Through
its subsidiary Xinhua Finance Media Limited (NASDAQ:XFML), XFL
leverages its content across multiple distribution channels in
China including television, radio, newspaper, magazine and outdoor
media. Founded in November 1999, XFL is headquartered in Shanghai,
with offices and news bureaus spanning 11 countries worldwide. For
more information, please visit http://www.xinhuafinance.com/ . Safe
Harbor Statement This announcement contains forward-looking
statements. These statements are made under the "safe harbor"
provisions of the U.S. Private Securities Litigation Reform Act of
1995. These forward-looking statements can be identified by
terminology such as "will," "expects," "anticipates," "future,"
"intends," "plans," "believes," "estimates," "confident" and
similar statements. Among other things, quotations from management
in this announcement contain forward-looking statements. Statements
that are not historical facts, including statements about XFMedia's
beliefs and expectations, are forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties
that could cause actual results to differ materially from those
contained in any forward-looking statements. Potential risks and
uncertainties are risks outlined in XFMedia's filings with the U.S.
Securities and Exchange Commission, including its registration
statement on Form F-1. All information provided in this press
release is as of the date hereof, and XFMedia undertakes no duty to
update such information, except as required under applicable law.
More Information: Xinhua Finance Hong Kong/Shanghai Ms. Joy Tsang,
Tel: +852-3196-3983, +852-9486-4364, +86-21-6113-5999 Email: Taylor
Rafferty (IR Contact) Japan Mr. James Hawrylak Tel: +81-3-5444-2730
Email: United States Mr. John Dudzinsky Tel: +1-212-889-4350 Email:
DATASOURCE: Xinhua Finance Limited CONTACT: Media Contact, Ms. Joy
Tsang of Xinhua Finance Media, +86-21- 6113-5999, or ; IR Contacts,
Mr. James Hawrylak in Japan, +81-3-5444-2730, , or Mr. John
Dudzinsky in US, +1-212-889-4350, Web Site:
http://www.xinhuafinance.com/
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