Moody's Investors Service has assigned a definitive Ba1 senior unsecured bond rating to the US$1 billion 5.25% notes due 2021 issued by PT Pertamina (Persero).
Moody's definitive rating on this debt obligation confirms the provisional rating assigned on 9th May 2011. The rating agency's rationale was set out in a press release published on the same day, and explored more fully in a Credit Opinion published on 10th May 2011.
The bond proceeds will be used for financing capital expenditures and for general corporate purposes. As a Government-Related Issuer (GRI), Pertamina's Ba1 rating reflects its baseline credit assessment (BCA) of 11, which maps to Moody's global scale of Ba1, and the strong support and dependence from the Indonesian government (Ba1/stable) under the Joint Default Analysis approach (JDA).
Pertamina's BCA reflects the company's strategically important position as Indonesia's national integrated oil & gas company, contributing significant upstream production and accounting for all the current refining capacity in the country.
It operates at a low-cost and moderate leverage, though the latter is expected to rise with its planned investments.
The company is exposed to moderate regulatory risks associated with a transitioning framework, and execution risks associated with increasing investments in upstream exploration and production, refineries, and potentially acquisitions.
Moody's views the credit profiles of Pertamina and the Indonesian government as closely linked to each other, given Pertamina's strategic role in oil & gas exploration and product distribution for the country, as well as the government's tight supervision over Pertamina's strategies and budgets.
The principal methodology used in rating PT Pertamina (Persero) was the Global Integrated Oil & Gas Industry Methodology, published November 2009.
Pertamina is a 100% Indonesian government-owned, fully-integrated oil and gas corporation, with operations in upstream oil, gas and geothermal exploration and production, downstream oil refining, marketing, distribution, transportation and trading of petroleum products.
Disclosure: No position at the stock mentioned above.
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