Moody's Ratings revises BUMA's outlook to negative

(Singapore, October 06, 2025) -- Moody's Ratings (Moody's) has affirmed Bukit Makmur Mandiri Utama (P.T.)'s (BUMA) Ba3 corporate family rating (CFR) and the B1 rating on its senior secured notes due 2026.

The outlook has been revised to negative from stable.

"The change in outlook to negative is based on our expectation that BUMA's credit metrics will remain weak over the next 12-18 months following operational disruptions amid challenging weather during the first half of 2025," says Anthony Prayugo, a Moody's Ratings Analyst.

"While the company has taken steps to cut costs and boost production, it has reduced headroom to absorb further operational or industry headwinds ," adds Prayugo, also Moody's Ratings lead analyst for BUMA.

RATINGS RATIONALE

BUMA's performance in the first half of 2025 (1H 2025) was significantly impacted by heavy rainfalls, safety incidents involving third parties, and projects ramp-downs. These disruptions caused overburden removal and coal production volumes to decline by around 23% and 10% year-over-year respectively for 1H 2025.

At the same time, the company's earnings were impacted by temporary higher costs associated with winding down expiring contracts, and ramping up operations at new contracts. BUMA's reported EBITDA fell to $64 million in 1H 2025 compared with $160 million in 1H 2024. A bulk of the decline occurred in Q1 2025 when EBITDA was only about $14 million.

We expect operational performance and earnings to improve in 2H 2025, supported by cost-saving initiatives and new contract ramp-ups, but these improvements are unlikely to fully offset the weak earnings in the first half of the year. Furthermore, BUMA's US anthracite mining subsidiary, Atlantic Carbon Group, Inc. (ACG), has yet to contribute material earnings to the group since its acquisition in 2024.

Consequently, BUMA's adjusted debt/EBITDA will increase to 5.4x in December 2025 before declining to around 3.6x in 2026 and 3.1x in 2027.

We expect BUMA will likely breach one of its existing financial maintenance covenants on its bank loans – net debt/EBITDA not exceeding 3.75x – in 3Q and 4Q 2025. However, the company has already obtained waivers from banks until at least December 2025, and is unlikely to require further waivers beyond this period.

Despite challenging operating conditions, BUMA will maintain adequate liquidity over the next 12-18 months. The company's internal cash sources and committed credit lines will be sufficient to meet its cash needs over the next 12-18 months, which includes a $212 million US dollar senior secured note maturing in February 2026.

BUMA had around $440 million undrawn committed credit facilities under its $1 billion syndicated loan as of the end of June 2025 that could be utilized towards repaying its US dollar notes.

The company also announced its third conventional IDR bond issuance, targeting up to IDR1.4 trillion ($85 million) in principal, of which around IDR540 billion ($33 million) has been subscribed to date. We expect the proceeds to be received in October.

BUMA's US dollar notes are rated one notch below the CFR because the noteholders have to contend with secured bank debt, which has a priority claim and ranks ahead of the notes. The US dollar notes, along with BUMA's unsecured IDR bonds made up around 40% of BUMA's total debt (excluding leases) as of 30 June 2025.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

An upgrade of BUMA's ratings is unlikely over the next 12-18 months, given the negative outlook. However, we could revise the outlook to stable if BUMA (1) materially improves its overburden removal volumes and earnings in the next few quarters, (2) addresses its US dollar notes maturing in February 2026 while maintaining adequate liquidity, (3) successfully ramps up operations at ACG, and (4) does not pursue more aggressive financial policies regarding growth and shareholder returns.

Specific indicators we would consider to stabilize the outlook include adjusted debt/EBITDA below 3.5x and adjusted EBITDA/Interest above 4.0x, both on a sustained basis.

We could downgrade the ratings if (1) BUMA's credit metrics weaken further; (2) its liquidity deteriorates, or (3) its underlying financial policies change materially.

Credit metrics indicative of a downgrade include adjusted debt/EBITDA staying above 3.5x or EBITDA/interest expense staying below 4.0x, both on a sustained basis.

The principal methodology used in these ratings was Business and Consumer Services published in November 2021 and available at https://ratings.moodys.com/rmc-documents/356424. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

The Ba3 rating is two notches above the scorecard-indicated outcome of B2. The difference reflects BUMA's status as Indonesia's second-largest coal mining contractor with a long operating track record, its additional coal mine contracting operations in Australia, its history of maintaining conservative financial policies, and our expectation of a recovery in its operational performance in the second half of 2025.

COMPANY PROFILE

Established in 1998, Bukit Makmur Mandiri Utama (P.T.) (BUMA) is a mining services contractor in Indonesia and Australia that provides open-cut mining services to thermal and metallurgical coal producers. BUMA is 100% owned (less one share) by PT BUMA Internasional Grup Tbk, an investment holding company listed on the Indonesian Stock Exchange. (ends)