Aug 2, 2011

Moody's assigns B1 to Berau Energy

Moody's Investors Service has assigned a B1 corporate family rating to Berau Coal Energy Tbk (BRAU). At the same time, Moody's has withdrawn the B1 corporate family rating of PT Berau Coal, a 90% owned subsidiary and major operating entity of BRAU.  
Moody's believes that since BRAU is the listed holding company, its corporate family rating better reflects the group's consolidated credit profile than that of Berau Coal.
Moody's has therefore withdrawn Berau Coal rating for business reason. Moody's has also affirmed the B1 senior secured bond rating on the US$450 million, five-year notes issued by Berau Capital Resources Pte Ltd, which is wholly owned by BRAU. The notes are guaranteed by BRAU and its subsidiaries, including Berau Coal. The ratings outlook is stable. 
"BRAU rating reflects the majority ownership of Berau Coal, one of the world's lowest-cost producers and exporters of coal," said Simon Wong, a Moody's Vice President and Senior Analyst.
Berau Coal has a track record of consistent production growth and its customer base consists of large utilities with excellent payment records. 
"Moody's expects BCE to gradually reduce leverage over the medium term despite its expansionary capex plans. Nevertheless, Moody's would like to see a period of stability in ownership and greater clarity in strategic direction," addsed Wong, who is also the Lead Analyst for BRAU. 
In April, Bumi Plc completed its acquisition of a 75% stake in BRAU from PT Recapital Advisors and was required under the Indonesian stock exchange rules to make a mandatory cash offer for BRAU's shares. Bumi Plc increased its stake in BRAU to 84.7% after the expiry of the cash offer in June 2011. Despite the low level of public float, BRAU is expected to maintain its listing status. 
Moody's is cognizant that BRAU will be subjected to increasingly stringent corporate governance standards, particularly after the premium listing of its parent Bumi Plc on the London Stock Exchange in June 2011. 

Disclosure: No position at the stock mentioned above.  

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