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Research Announcement:

Moody's - Refinancing risk to rise for Indonesian coal miners ahead of large debt maturity wall

11 November 2019


Singapore, November 11, 2019 --

  • Around $2.9 billion of bonds and bank debt are due in 2022, compared with around $800 million in 2020 and $700 million in 2021
  • The absence of clear refinancing plans could pressure coal miners' credit quality as 2022 approaches

Moody's Investors Service says in a new report that while the cash needs of rated Indonesian coal mining companies are manageable over the next 12 months, refinancing risk will rise materially towards 2022 ahead of a large debt maturity wall.

"The seven Indonesian coal miners that we rate have sufficient liquidity to address their cash needs over the next 12 months, including projected capital spending, dividends and scheduled debt maturities," says Maisam Hasnain, a Moody's Assistant Vice President and Analyst. "But refinancing risk will rise materially towards 2022, and credit quality will likely weaken for miners in the absence of clear refinancing plans 12-18 months before their debt maturities."

"For some miners, the capacity to refinance maturing debt will depend on their need to replace depleting coal reserves, while others have mining licenses expiring over the next few years," adds Hasnain.

Refinancing risk is further exacerbated by rising creditor concerns over environmental risk, which could materially limit sources of capital, and for some miners also by the untested track record of redeeming US dollar bonds.

Among the rated companies, Moody's says those with strong business profiles, large coal reserves and demonstrated access to capital markets are better positioned to manage refinancing risk. These include Adaro Indonesia (P.T.) (Ba1 stable) and Indika Energy Tbk (P.T.) (Ba3 stable).

Absent countermeasures, ABM Investama Tbk (P.T.) (B1 stable) and Geo Energy Resources Limited (B2 negative) will have considerably weaker credit profiles as they approach their scheduled debt maturities, due to their depleting coal reserves. However, both companies remain committed to acquiring coal assets within the next 6-12 months.

And among the companies with mining licenses expiring before debt maturities, Adaro, Indika and Bumi Resources Tbk (P.T.) (B3 negative) face higher regulatory uncertainty because mining rights at their coal concessions are under Coal Contract of Work (CCoW) licenses. While Moody's expects the CCoWs to be extended on broadly similar terms, there is limited clarity from the Government of Indonesia (Baa2 stable) on the extension or conversion of these licenses.

Subscribers can access the report "Coal mining - Indonesia: Refinancing risk will rise closer to 2022 because of large debt maturity wall" at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1146747

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at [email protected] or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Maisam Hasnain, CFA
AVP-Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

Ian Lewis
Associate Managing Director
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

Releasing Office :
Moody's Investors Service Singapore Pte. Ltd.
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JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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