Feb 22, 2011

Berlian Tanker outlook revised to stable

Fitch Ratings has revised Indonesia-based PT Berlian Laju Tanker Tbk's (BLTA) outlook to stable from negative. Its long-term foreign and Local currency issuer default ratings (IDR) have been affirmed at B-, respectively.
At the same time, the agency has upgraded Berlian Tanker Finance B.V.'s US$400 million senior unsecured notes due 2014 to CCC from CC and revised the recovery rating to RR5 from RR6. The notes are guaranteed by Berlian Tanker.
"The revision of outlook to Stable reflects the significant improvement to Berlian Tanker's liquidity profile due to its successful debt refinancing, which reduces its debt servicing requirement, and a material reduction of its capex for 2011 and 2012," said Buddhika Piyasena, Director in Fitch's Asia-Pacific Corporates team.
Berlian Tanker announced that it has refinanced US$593 million of offshore US$ bank debt with a new credit facility of US$685 million.
The refinancing package reduces Berlian Tanker's debt amortising burden by US$166 million for 2011-2013.
This is a significant reduction given BLT's weak liquidity profile prior to the refinancing. In addition, the company has substantially reduced the outlay for newbuilds to US$122 million from US$240 million in 2011 and to US$52 million from US$80 million in 2012.
Berlian Tanker has US$70 million from the new financing package to fund the majority of its capex in 2011.
Fitch expects that Berlian Tanker will use a mix of debt and sale-and-lease back to fund the remaining capex through 2012.
In assessing Berlian Tanker's liquidity, Fitch also factors in the company's cash reserves of US$160 million at end-September 2010 and its stabilising operating cash generation. In the nine months to September 2010, Berlian Tanker generated an EBITDA of US$189 million.
However, Berlian Tanker faces some refinancing risks in 2012 and, possibly, in 2013. It has US$120 million equivalent of Indonesian rupiah bonds falling due in May and July of 2012, while holders of the US$125 million convertible bond issued in 2010 have an option to put the notes to the company in 2013.
In addition, Berlian Tanker has US$400 million notes falling due in 2014. Although the improved liquidity profile makes it easier for Berlian Tanker to access funding, Fitch notes that the non-availability of unencumbered assets limits its refinancing options.
These refinancing risks and BLT's still weak liquidity make a positive rating action unlikely over the short-to-medium term.
On the other hand, the ratings could come under pressure from a deterioration in Berlian Tanker's liquidity due to weaker-than-expected operating cash generation, the company not being able to adequately address its refinancing needs in a timely manner and/or an unexpected increase in capex.
The revision of the recovery rating on the US$ notes reflects improved recovery prospects following the increased value of Berlian Tanker ships in 2010 due to stabilisation of the shipping market.
However, the 'RR5' rating indicates that recovery prospects given default for BLT's unsecured notes are still below average.

Disclosure: No position at the stock mentioned above.
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