Standard & Poor's Ratings Services (S&P) said today that it had lowered its long-term corporate credit rating on Indonesia-based shipping company PT Berlian Laju Tanker Tbk (BLTA) to CC from B-.
"We also lowered our rating on the US$400 million senior unsecured notes due 2014, issued by BLT Finance B.V., a wholly owned subsidiary of BLTA, to C from CCC. BLTA guarantees the notes. We have placed both ratings on CreditWatch with negative implications."
"We lowered the ratings because we believe BLTA's self-imposed suspension of debt repayment has substantially increased the probability of default," said Standard & Poor's credit analyst Vishal Kulkarni.
"Also, the stoppage of lease payments and a default on debt obligations that are secured by ships could considerably imperil the company's operations."
A global economic slowdown, higher operating costs, and currently low freight rates have severely affected Berlian Tanker's ability to service its debt obligations.
The company said that it would temporarily stop the payments on all it debt and lease obligations. Berlian Tanker also announced a covenant breach at one of its subsidiaries and that some of its subsidiaries have stopped making lease payments.
"We aim to resolve the CreditWatch placement over the next few weeks, once we have greater clarity on whether BLT has actually missed any interest payments," said Mr. Kulkarni.
We could lower the rating on Berlian Tanker and the notes to D if the company actually misses an interest or principal repayment. We could raise the rating if Berlian Tanker: (1) secures timely and sufficient funding to continue to service its debt obligation; (2) repairs its covenant breach; and (3) continues the lease payments.
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