Fitch Downgrades Central Proteinaprima to CCC

Fitch Ratings downgraded PT Central Proteinaprima Tbk's (CPP) Long-term Issuer Default Rating (IDR) to CCC from B. Fitch also has downgraded the rating of CPP's USD325m senior unsecured notes due 2012 (the USD Notes), issued by Blue Ocean Resources Pte Ltd (Blue Ocean) and guaranteed by CPP and its subsidiaries, to CCC from B. The ratings remain on Rating Watch Negative. The recovery rating of the USD Notes is RR4.
The downgrades reflect Fitch's expectation that CPP's liquidity may deteriorate further as the company faces difficulty renewing short-term bank loans, on which it is reliant for working capital needs. This is due to the fact that the company is no longer able to meet the financial covenants on the loans, which require interest coverage of at least 2x, as a result of a virus contamination in its shrimp ponds.
The contamination caused CPP's EBITDA to fall significantly to IDR27.8bn in Q209 from IDR255.1bn in Q109, leading to a very low interest coverage, as measured by EBITDA/gross interest expense, of 1.1x in H109. Fitch expects shrimp production to remain weak in Q309 as the company needs about 120 days to harvest new production from the ponds that had previously been contaminated by the virus. Two of its banks have already terminated facilities given to CPP and there is an increased potential for unfavourable action from other lenders due to the covenant breach.