Dayabumi to default on bond repayment

Standard & Poor's Corp. said yesterday it expects to lower its ratings on DSPL Finance Co. BV's US$150 million senior secured notes due 2010 to D from CC.

This reflects the expectation that DSPL will be unable to make its first principal payment of about US$1.6 million to noteholders due today.

The DSPL notes are guaranteed by Dayabumi Salak Pratama, which is a 165MW geothermal independent power project located on Java, Indonesia, which is a 50-50 joint venture between Unocal Corp. of the US and PT Nusamba.

DSPL hasn't met its principal payment commitments on its syndicated bank loan since December last year, S&P said.

However, the company's bank lenders had agreed to defer two installment payments, thereby avoiding a cross-default on the notes under the terms of the common agreement.

Nevertheless, DSPL is now not expected to make the June 30 principal payment on its syndicated loan. Interest payments on both the notes and the loan should remain current.

According to S&P, DSPL has faced a number of challenges in the past two years, resulting in a depletion of its debt service reserve and the exhaustion of various other sources of funds to make debt repayments.

Since May 1998, PT Perusahaan Listrik Negara (Persero), or PLN, the Indonesian government-owned electricity utility, has paid only 20%-30% of amounts invoiced to Dayabumi through Pertamina, Indonesia's national oil company, forcing DSPL to meet its debt service commitments through a combination of other sources.

DSPL used up its debt service reserve fund in March 1999.

S&P said the continuing economic difficulties of Indonesia and PLN's poor financial position indicate that short-term prospects for full electricity payments to the independent power producer are extremely poor.

"The Indonesian government had announced its intention to become involved in PLN's IPP contract restructuring in early 2000, but there has been no significant progress toward the renegotiation of DSPL's contract," S&P said. (*)