Irvin Avriano A.
Bakrie Plantations' rating slumped to Caa1
JAKARTA: Moody's Investors Service dowgraded PT Bakrie Sumatra Plantations Tbk's corporate and bond rating one step from B3 level to Caa1 level, related to hiked leverage.
The international credit rating company also still assign prospect for those rating in negative level.
Alan Greene, Vice President & Senior Credit Officer Moody's, in their press release said the downgraded rating caused by needs of fund to refinance Bakrie Plantations's debt and the improvement of their financial performance the stock emitters that coded UNSP.
“The downgrade reflects two main challenges facing Bakrie Sumatera, the high level of leverage following the acquisition of the Domba Mas businesses-despite a large rights issue of US$520 million in early 2010, and heightened liquidity risk from maturing debt," said him in the press release yesterday.
He assess the company needs to acquire a fresh fund before November this year when their denominated US dollar bond worth US$160 million mature.
Ability to repay debt still low
Greene added, even if the fresh fund successfully pocketed, the company still have outstanding bond worth US$150 mio which issued by their new subsidiary, Agri International Resources Pte Ltd, that will mature on 2012 July.
“Meanwhile progress towards resolving the concerns that led to the review -- such as the bond refinancing, the assimilation of Domba Mas, and the level of disclosure and transparency -- has been limited."
Moody's also still confirmed rating on Agri International Resources and its bond that issued by their subsidiary AI Finance BV, which is wholly owned and guaranteed by Agri International. The outlook from the ratings remains negative.
"The rating action follows the downgrade of Agri International holding company, Bakrie Plantations and reflects both the close operating and financial dependencies between the two
companies" says Greene.
He added the after Bakrie Plantations purchased Domba Mas, the one of the Bakrie Group company need for palm oil, and thus its reliance on Agri International, has increased.
Greene also noted Agri International standalone liquidity remains weak, indicating a limited ability to meet interest payments and the final bond maturity on July 2012.
Furthermore, adverse weather tempered production volume in 2010. Absent any external support, Agri International assessed unlikely to be able to cover its capex, working capital, and debt service requirements out of internally generated cash flow.