Fitch assigns A+(idn) rating to Titan bonds

Fitch Ratings has today assigned final ratings of 'A+(idn)' to PT Titan Petrokimia Nusantara's IDR73 billion bond and IDR200 billion Islamic Bond, due June 2015.

Although the issue size is lower than the total IDR500 billon previously communicated by the company, Fitch notes that TPN's capital structure, liquidity and credit profile have not changed materially.

Also Titan Petrokimia continues to benefit from its parent, Titan Chemicals Corp. Bhd. (Titan Chemicals), which provides about 30% of Titan Petrokimia's ethylene feedstock requirements from its own production and acts as a purchasing agent for the rest.

Fitch notes that Titan Petrokimia's Q110 operating results were weak with its polyethylene (PE) production volume falling to 48,309 tonnes (MT) from a quarterly average of 73,334 MT in 2009, due to a global ethylene shortage.

Also, margin spreads (based on PE selling price and ethylene purchase price) decreased to about USD93-USD138 per MT in Q110 from USD337-USD345 per MT in 2009. However, the company has witnessed an improvement in the ethylene - PE prices relationship, and increased the regional supply of ethylene in Q210.

Accordingly, Fitch expects the company to report higher production volume and margin spreads in Q210 as compared to Q110. However, Fitch expects that the overall ethylene - PE margin spread during 2010-2011 would be under pressure given the change in global demand and supply relationships from significant low-cost production capacity coming on-stream in the Middle East.
Titan Petrokimia's 'A+(idn)' National long-term rating with Stable Outlook is based on Fitch's expectation that the company can maintain a financial profile appropriate for its rating through an expected upcoming downturn in the petrochemical industry during 2010-2011. Nevertheless, a sustained very weak operating performance may lead to a consideration of a negative rating action.