Moody's decrease Indosat's outlook to negative

BI/bursa

11/3/2010

Irvin Avriano A.

for Bisnis Indonesia

Moody's decrease Indosat's outlook to negative

JAKARTA: Moody's Investors Service lowered ratings outlook for the company and the bonds of PT Indosat Tbk from a stable level to a negative level due to the potential increase in the ratio of debt to EBITDA. The company's and bond's ratings itself affirms at the Ba1 level.

"The revision in outlook to negative is driven by our expectation that Indosat's adjusted ratio of debt to EBITDA will increase to above 3 times," said Moody's analyst Ivan Palacios in the disclosure of information at Indonesia Stock Exchange (IDX/Bursa Efek Indonesia) websites today.

EBITDA is a calculation of the company's earnings before interest, taxes, depreciation, and amortization.

He considered the ratio increased due to the companies financing requirements this year will increase. The escalation, he continued, was also considered will increase the proximity to the company's covenant, associated with the bonds that have been issued the company.

According to him, the company's operations conditions will improve in recent years, but the increase in revenue, EBITDA, and cash flow will not be sufficient to lower the leverages to less than 3 times this year.

In addition, Moody's also considered Indosat's liquidity will remain tight in the short and medium term because the company's cash funds and cash flow alone will not be enough to cover the needs of corporate capital expenditures, working capital, and debt needs.

These deficits, he said, is expected to be covered by issuing corporate bonds in large quantities which will impact on the lack of space between the company's financial covenant limits. Narrowness of the differences will make the state-owned telecommunications company's financial flexibility will be constraints.