Singapore, February 27, 2012 -- Moody's Investors Service has changed the outlook of PT Berau Coal Energy
Tbk (Berau) to positive from stable and affirmed the B1 corporate family
and senior secured ratings.
Moody's has also assigned a provisional (P)B1 rating with a positive outlook
to the proposed five-year senior notes.
The notes will be issued by Berau and unconditionally guaranteed by PT
Berau Coal, PT Armadian Tritunggal, Empire Capital Resources
Pte. Ltd., Winchester Investment Holdings PLC and
Aries Investments Limited, Seacoast Offshore Inc. and Maple
Holdings Ltd.
The provisional status of the notes will be removed once the issuance
is completed.
RATINGS RATIONALE
"The positive outlook reflects Berau's continued improvement to
its operating performance and financial metrics, and our expectation
that Berau will continue to maintain a prudent financial profile,"
says Simon Wong, a Moody's Vice President and Senior Analyst.
"The proposed bond issuance and the higher capex during 2012 to
2013 will increase Berau's adjusted consolidated debt/EBITDA leverage
to around 2x, which is still strong for the current rating.
We expect Berau to gradually deleverage over the medium term," adds
Wong, who is also lead analyst for Berau.
Berau's adjusted consolidated total debt/EBITDA was 1.5x
for LTM 30 September 2011.
The company has increased its budgeted capex over the next three years
to about US$691 million in order to construct an overland conveyor
and power station, boost production capacity, and fund the
exploration and development of two new mine sites.
It plans to use the proceeds from the proposed bond to refinance the existing
credit facility, fund capital expenditure, and for general
corporate purposes.
"Nevertheless, the maintenance covenants attached to the existing
credit facility will be removed following the refinancing. Furthermore,
the recent shareholder change at Bumi PLC, as well as the subsequent
proposition to reshuffle key board members of Bumi PLC, have added
some uncertainty for investors," adds Wong.
Berau is 84.7%-owned and controlled by Bumi PLC.
Bakrie & Brothers sold half of its 47.6% effective interest
in Bumi PLC to Borneo Lumbung Energi & Metal (Borneo) in early 2012.
Borneo is a major coking coal producer in Indonesia.
The B1 rating reflects Berau's majority ownership of PT Berau Coal,
one of the world's lowest-cost producers and exporters of coal
with a consistent track record of production growth. In addition,
its customer base consists of large utilities with excellent payment records.
The ratings also consider Berau's lack of diversification,
given its single concession and single product, and its exposure
to commodity cycles, as well as the uncertainty in the regulatory
environment. Berau also faces a high level of concentration risk,
as its top ten customers account for approximately 75% of its revenue.
The positive outlook reflects Berau's improved credit metrics,
expanding production capacity, and Moody's expectation that
Berau and Berau Coal will maintain a prudent financial profile.
Upward rating pressure may emerge if Berau expands its production capacity
as planned, while maintaining the current prudent financial profile
such that adjusted consolidated total/EBITDA remains below 2x and adjusted
consolidated EBIT / interest expense stays above 3.75x.
Moody's would also like to see a track record of stability in Berau's
ownership and more clarity of its strategic direction under Bumi PLC.
Downward pressure on the ratings could emerge, if industry fundamentals
deteriorate, leading to a decline in free cash flow that could constrain
Berau's ability to make debt payments. Indicators that Moody's
would consider as triggers for a downgrade include adjusted consolidated
debt/EBITDA rising above 3.5x or adjusted consolidated EBIT/interest
expense falling below 2.75x.
Other negative rating triggers include (1) a material change in Bumi PLC's
financial policy, resulting in deterioration to Berau's capital
structure; (2) any adverse decision regarding the off-setting
of VAT payments; or (3) any change in laws and regulations,
particularly with regard to mining concessions, that would adversely
affect the business.
The principal methodology used in rating Berau was Moody's Global Mining
Industry, published in May 2009. Please see the Credit Policy
page on www.moodys.com for a copy of this methodology.
PT Berau Coal (and it parent Berau Coal Energy) is Indonesia's fifth-largest
producer and exporter of thermal coal. It operates three active
mines (Lati, Sambarata and Binungan) at a single site in East Kalimantan.
It had estimated coal resources of 1.94 billion tons, and
proven and probable reserves estimated at 467 million tons as of 31 December
2010.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 30 April
2012. Further information on the EU endorsement status and on the
Moody's office that has issued a particular Credit Rating is available
on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Simon Wong
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Philipp L. Lotter
Associate Managing Director
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Moody's changes Berau Coal Energy outlook to positive
