Fitch: Indika Energy's Proposed USD Notes 'B+(EXP)'
Wednesday, January 9 2013 - 04:38 AM WIB
The notes will be guaranteed by PT Indika Energy Tbk (Indika; 'B+'/Positive) and some of its subsidiaries. Indo Energy Finance II B.V. is a special purpose entity wholly owned by Indika.
The notes are rated at the same level as Indika's Issuer Default Rating of 'B+', as the guarantee issued by Indika will rank equally in right of payment with all unsecured, unsubordinated indebtedness of Indika. The final rating is contingent upon the receipt of final documents conforming to information already received.
Proceeds from the proposed notes will largely be used to refinance existing debt of about USD235m, mostly associated with the purchase of PT Multi Tambangjaya Utama (MTU), a coal mining company, in 2012.
Indika's rating reflects strong dividend inflows from its 46%-held PT Kideco Jaya Agung (Kideco), the third-largest coal producer in Indonesia. It also reflects increasing earnings contribution from Indika's other operations in the coal value chain such as contract mining and logistics as well as from its engineering, procurement and construction business.
A higher-than-expected drop in coal prices has slowed the pace of Indika's deleveraging process, with lower dividends expected from Kideco in coming years. Fitch believes coal prices have stabilised, although little upside to current prices is expected over the next 12 to 18 months. Fitch may upgrade Indika's ratings if its financial leverage, as measured by adjusted debt net of cash to operating EBITDAR, falls below 1.5x on a sustained basis.
Fitch expects increasing earnings contribution from Indika's 69% owned mining sub-contractor PT Petrosea Tbk and 51%-owned PT Mitrabahtera Segara Sejati. Fitch also expects meaningful earnings contribution from MTU from 2015 onwards if Indika can successfully ramp up production from MTU as planned.(ends)