Moody's assigns first-time (P)Ba3 ratings to Apexindo, outlook stable
Tuesday, September 17 2013 - 12:38 AM WIB
The CFR is provisional on successful completion of the proposed refinancing.
At the same time, Moody's has also assigned a provisional (P)Ba3 rating to the proposed USD-denominated secured bonds to be issued by Apexindo Netherlands B.V., a wholly-owned subsidiary of Apexindo. The proposed bonds are irrevocably and unconditionally guaranteed by Apexindo and some of its subsidiaries.
The provisional rating is subject to Moody's review of the final documentation of the bond offering circular.
The outlook on the ratings is stable.
"The Ba3 corporate family rating reflects the company's backlog of contracted revenues of $762 million, equivalent to over 3.6x its FY 2012 revenues; its relatively small but stable fleet profile with no new vessels on order; and its competitive market position in the Indonesian contract drilling industry, which benefits from regulations that require oil and gas companies to use a proportion of local content in their exploration and development activity," says Vikas Halan, a Moody's Vice President and Senior Analyst.
The ratings, however, are constrained by the company's concentrated exposure to a single but high quality counterparty -- Total SA -- which accounts for 77% of its backlog of contracted revenues.
"Further rating constraints include the company's geographical concentration in Indonesia, its exposure to the highly cyclical oil and gas exploration and development industry, and its fairly high financial leverage," adds Halan, who is also the lead analyst for Apexindo.
For 2012, Apexindo's leverage was relatively high for its ratings with operating lease Adjusted debt/EBITDA of 4.3x , adjusted debt/capitalization of 67.4% and EBIT/Interest of 1.9x.
For the last twelve months (LTM) ended in June 2013, Apexindo reported revenue of $237million as compared to $209 million for 2012. The operating lease adjusted EBITDA for LTM June 2013 also increased to $133 million as compared to $120 million for 2012. The performance in the six months ended in June 2013 was in line with the company's performance in the previous six months ended December 2012 but better than the first six months of 2012.
Credit metrics in 2013 will stay at levels similar to 2012 as three of the company's offshore vessels are due for blow-out-preventer (BOP) certification and dry docking, which will reduce their utilization levels and consequently EBITDA will only marginally improve in 2013, despite increase in day rates on recently renewed contracts, as compared to 2012.
Moody's expects credit metrics to improve from 2014 onwards as vessel utilization improves and higher day rates take full effect, such that adjusted debt/EBITDA will decline below 4.0x and EBIT/Interest will increase to 2.5x.
The company faces significant contract renewal risk in 2015 and early 2016 when the current contracts on 5 of its 13 vessels end. But Moody's notes that it has a history of successfully renewing its contracts and has maintained an average 90% utilization for its offshore vessels over the last 5 years.
In 2009, Apexindo's holding company, PT Mitra International Resources Tbk, also had a history of debt restructuring. Since then, the holding company, which has no other assets, was acquired by PT Aserra Capital.
The provisional CFR and rating of the bond are based on Moody's expectation that the refinancing exercise will repay the bank facility and the remaining proceeds will be used for general corporate purposes, including the repurchase or repayment of the IDR bonds on or prior to their maturity.
The outlook on the rating is stable, reflecting Moody's expectation that the company will refrain from making any debt-funded acquisitions, continue to perform on all its contracts, maintain high utilization levels, and will be able to successfully renew its contracts with high quality counterparties.
The rating would come under pressure if 1) the utilization of the company's vessels drops due to operational challenges, or due to its inability to renew its contracts when they expire, or 2) if the company changes its policy and embarks on a debt-funded fleet expansion programme. Credit metrics that Moody's will consider as indicative of downward pressure on the ratings include adjusted debt/ EBITDA staying above 4.0x and EBIT/ Interest failing to improve to 2.5x, by FY2014.
A rating upgrade in the near to medium term is unlikely. Nonetheless, upward pressure on the rating can develop over time, if the company: 1) successfully renews its contracts at more attractive rates, 2) increases its equity base and uses the proceeds to expand its fleet, or 3) increases its revenues and EBITDA such that its credit metrics improve. Credit metrics that may lead to an upgrade of the rating include Adjusted debt/EBITDA below 3.0x and EBIT/Interest exceeding 3.5x, on a sustained basis.
The principal methodology used in these ratings was the Global Oilfield Services Rating Methodology published in December 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
PT Apexindo Pratama Duta Tbk (Apexindo), is Indonesia's leading provider and operator of rigs for the oil, gas, coal-bed methane and geothermal drilling industries. It has been in business since 1984 and operates a fleet of 8 onshore rigs, 6 offshore rigs and 1 floating production storage and offloading (FPSO) vessel.
Listed on the Jakarta Stock Exchange, Apexindo is 87.3% owned by Apexindo International Pte. Limited (unrated), which in turn is 96.1% owned by PT Apexindo Energi Investama (unrated), a 100% subsidiary of PT Aserra Capital (unrated). (ends)