Fitch Ratings has downgraded Indonesia's Berlian Laju Tanker Tbk's (BLT) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to CCC from B-.
The rating on BLT's US$400 million senior unsecured notes due 2014, issued by BLT Finance B.V. and guaranteed by BLT, have also been downgraded to CC from CCC based on a recovery rating of RR5. No rating outlooks have been assigned.
The downgrades reflect BLT's heightened liquidity risk as it has yet to secure refinancing for the Rp1.15 trillion (US$127.4 million) domestic bonds that are maturing in May and July 2012.
While the company had US$105.7 million of unencumbered cash and US$88.9 million as debt-oriented mutual fund investments at end-September 2011, Fitch notes that it is required to maintain a minimum cash balance of US$75 million to comply with bank loan covenants.
The agency estimates that these balances and projected operating cash flows are inadequate to repay the bonds falling due in 2012, especially in light of committed capex.
Limited unencumbered asset balance - US$9 million as at end-September 2011 - makes refinancing a difficult proposition.
Even if BLT is able to refinance the 2012 notes, it faces looming debt maturities in 2013 and 2014. The company's USD125m convertible bond has a put option exercisable in February 2013 and is currently out-of-the-money. US$400 million notes fall due in May 2014.
In addition, BLT has US$297.2 million of debt - mostly secured - that needs to be refinanced between 2012 and 2014. Fitch notes that the outlook for BLT's key business of chemical tankers is stable and that the company has the advantage of being an early entrant in the profitable Indonesian cabotage business.
The agency expects BLT's cash flow from operations to improve over the medium term given its significant presence in the chemical tanker and Indonesian cabotage businesses, though rising fuel costs may temper that.
Given that the CCC rating is driven by primarily by refinancing risks, no outlook has been assigned. A positive rating action may be taken if BLT secures fresh long-term financing to address its impending capital market maturities.
A failure to refinance the IDR bonds maturing in mid-2012 will lead to further rating downgrades.
Disclosure: No position at the stock mentioned above.
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