Oct 27, 2010

Moody's affirms Bumi Investment at Ba3

Moody's Investors Service has affirmed Bumi Investment Pte Ltd's Ba3 senior secured rating and removed its provisional status following the successful issuance of 7-year $700 million 10.75% notes.
Moody's has also affirmed the Ba3 corporate family rating of PT Bumi Resources Tbk (Bumi).
The notes benefit from joint and severable unconditional and irrevocable guarantees from Bumi and subsidiaries, and rank pari passu to all existing and future senior unsecured claims of the issuer and guarantors.
The outlook for the ratings remains negative.
"The issuance has extended Bumi's maturity profile and, together with US$360 million of fresh equity, will significantly alleviate some of the company's near term refinancing risk, " says Alan Greene, a Moody's Vice President and Senior Credit Officer.
"Notwithstanding the refinancing exercise, Bumi's negative outlook reflects the extent to which Bumi's performance, despite improvement, has lagged projections", says Greene, also lead analyst for Bumi Resources, adding.
"While deleveraging has occurred, on a pro forma basis, and reflecting the non-preemptive rights issuance of US$360 million, normalized, consolidated adjusted debt/EBITDA stood at 3.6x at LTM June 2010. This value remains in excess of our downward rating trigger of 3.0x."
Upward rating pressure is unlikely given the negative outlook.
The outlook could revert to stable should Bumi deliver on its financial projections and offer a clear plan to reduce the debt burden such that adjusted, consolidated, debt/EBITDA falls below 3.0x on a consistent basis.
Further downward pressure could emerge on the rating should Bumi fail to deliver on its projections and specifically its deleveraging plans, or if it deviates from the business plan and strategy currently contemplated as part of the rating.
Moody's would also look for holdco leverage to decrease and failure to do so would put downward pressure on the rating.
Established in 1973 and listed on the Jakarta Stock Exchange in 1990, Bumi is Indonesia's largest thermal coal producer and one of the top three largest thermal coal exporters globally.
Through its principal assets (65% stake in PT Kaltim Prima Coal and 70% stake in PT Arutmin), Bumi accounts for approximately 25% of Indonesia's total coal production.
Approximately 19.3% of Bumi's shares are held by Bakrie & Brothers, which is controlled by members of the Bakrie family. Members of the Bakrie family (outside of Bakrie & Brothers) also own shares in Bumi.

Disclosure: No position at the stock mentioned above.
 
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