PEFINDO: PT Barito Pacific Tbk rated “idA”, outlook revised to “stable”

(April 12, 2021)--PEFINDO has affirmed its “idA” ratings for PT Barito Pacific Tbk (BRPT) and its Shelf Registered Bonds I. The outlook for the corporate rating has been revised to “stable” from “negative” to reflect our view on BRPT’s improved liquidity position in the near to medium term following the potential cash inflow in the form of dividend from its subsidiaries in the energy sector from Salak and Darajat assets in addition to Wayang Windu asset that has distributed dividend since 2019. Salak and Darajat assets, Star Energy’s subsidiaries, have issued USD1.11 billion bonds issued in October 2020 to early repay the syndicated loan that previously limited dividend distribution to BRPT. In December 2020, BRPT received USD56 million dividend income from Salak and Darajat assets and repaid USD50 million of USD200 million loan facility from Bangkok Bank. TPIA’s improved performance in the fourth quarter of 2020 is also expected to be maintained in the following quarters in line with expected better economic condition than that in 2020 and economic recovery in China, which improved the demand of petrochemical products and in turn their selling prices.

An obligor rated idA has a strong capacity to meet its long-term financial commitments relative to those of other Indonesian obligors.

However, the obligor is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than higher-rated obligors.

The rating reflects the solid market position of BRPT’s major operating segments in the petrochemical business through PT Chandra Asri Petrochemical Tbk and in the geothermal energy sector through Star Energy Group Holdings (SEGH), the favorable dividend distribution from these major subsidiaries, and the cushion the geothermal energy segment can provide against the cyclicality of the petrochemical sector. The rating is constrained by its moderate financial leverage, indirect access to the cash flow of its operating subsidiaries, and the inherent risks related to its key operating segments, in our view.

The rating may be raised if BRPT’s performance improves as reflected by sustained improvement in the financial profile, particularly its financial leverage as reflected by improved debt to EBITDA ratio to less than 3.0x as a result of deleveraging efforts and higher cash flow generation from subsidiaries. The rating may be lowered if there is a sustained deterioration in its financial profile due to narrowing spread in the petrochemical business and/or higher debt than projected without being accompanied by stronger cash flow generation.

The rating could also be under pressure if there is a deterioration in its cash flow stream from its subsidiaries, which may be triggered by a prolonged COVID-19 pandemic, resulting in a further downturn in the petrochemical sector, and/or a natural event that severely affects the geothermal segment. The rating has also not factored in the additional debt-funded capital expenditure for the construction of the second naphtha cracker under TPIA, as the final investment decision has not yet been finalized.

Established in 1979, BRPT is an investment holding company that is ultimately owned by Prajogo Pangestu. It currently operates in two major segments, petrochemical and geothermal energy, through its controlling stakes in PT Chandra Asri Petrochemical Tbk and Star Energy Group Holdings. It also operates in other minor segments, such as wood product manufacturing and property. As of December 31, 2020, its shareholders were Prajogo Pangestu (72.18%), PT Barito Pacific Lumber (1.21%), PT Tunggal Setia Pratama (0.34%), treasury stock (0.60%), and others (25.67%). (Ends)