Feb 16, 2012

S&P withdraws Fajar Surya rating

Standard & Poor's Ratings Services (S&P) today withdrew its B+ long-term corporate credit rating on Indonesia-based packaging paper manufacturer PT Fajar Surya Wisesa Tbk at the company's request.
The negative outlook at the time of the withdrawal reflected our expectation that Fajar could breach the covenant on its bank loan.
"We believe that the company has limited headroom in the covenant because its debt-to-EBITDA ratio is unlikely to improve significantly over the next 12 months due to lower margins." 
Global macroeconomic weakness and Fajar's limited ability to pass on the rising costs of raw material to consumers will continue to pressure margins. 
"We also expect the company to maintain its current level of debt. However, we understand that a possibility of a covenant waiver exists."

Disclosure: No position at the stock mentioned above. 

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