PT Bumi Resources Tbk, the largest producer and exporter of thermal coal in Indonesia with reserve life of about 40 years, expects to raise around US$440 million from selling non-core assets and from the repayment of a loan as part of its plan to reduce debt this year.
Bumi is aiming to cut debt by around $800 million in the fourth quarter. The company also mandated Deutsche Bank AG, Credit Suisse Group AG and JPMorgan Chase & Co. for the sale of 7-year dollar bonds to refinance debt.
Standard & Poor's Ratings Services today assigned its BB rating to the proposed issue of guaranteed senior secured notes by Bumi Investment Pte. Ltd., a wholly owned subsidiary of Bumi Resources.
At the same time, we affirmed the corporate credit rating on Bumi (BB/Stable/--; ASEAN scale rating axBBB-) and the 'BB' issue rating on Bumi's senior secured notes due 2016.
The rating on the proposed notes reflects the irrevocable and unconditional guarantee by Bumi Resources. The notes rank pari passu with the existing senior secured notes. Proceeds from the proposed notes will be used for refinancing Bumi Resources existing debt. The rating on the notes is subject to finalization of documentation.
The issue rating is the same as the corporate credit rating on Bumi as Standard & Poor's believes that the priority liabilities at Bumi Resources coal subsidiaries are unlikely to cause any structural subordination at the company, because of the limitation on the indebtedness and low level of other liabilities at the coal companies.
Also, Standard & Poor's does not apply its subordination notching criteria to corporations that have operations in Indonesia, reflecting the difficulty in enforcing creditor rights under the country's legal system.
Bumi Resources financial risk profile is significant, with the current debt to EBTIDA slightly above 3.0x. The high debt burden is primarily due to its latest debt-funded investments in non-coal assets. The company plans to use proceeds from a proposed shares issuance and internal cash for its debt reduction. S&P expect Bumi to bring its debt to EBITDA to a more comfortable level of below 3.0x within the next 12 months.
Bumi Resources financial risk profile is significant, with the current debt to EBTIDA slightly above 3.0x. The high debt burden is primarily due to its latest debt-funded investments in non-coal assets. The company plans to use proceeds from a proposed shares issuance and internal cash for its debt reduction. S&P expect Bumi to bring its debt to EBITDA to a more comfortable level of below 3.0x within the next 12 months.
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