Pefindo: PT J Resources Asia Pasifik Tbk’s rating lowered to “idBBB” with outlook revised to CreditWatch with Negative Implication

(September 21, 2021)--PEFINDO has lowered the ratings for PT J Resources Asia Pasifik Tbk (PSAB) and its Shelf Registered Bond I to “idBBB” from “idA” and revised the outlook for the corporate rating to “CreditWatch with Negative Implication” from previously “stable”. The rating actions reflect to the heightened refinancing and liquidity risk related to its maturing bank loan, following the demand from one of its creditors to fully repay all the outstanding loans of USD95.09 million on September 1, 2021. In its effort to repay the bank loans, PSAB is currently seeking for new strategic investors, but given the limited time to raise the substantial amount of funds, we are of the view that there is a high uncertainty for PSAB in repaying the financial liabilities, as well as the maturing Shelf Registered Bond I phase VI serie A of IDR252.2 billion due on December 7, 2021, initially to be repaid from the combination of internal funding and external funding.

An obligor rated idBBB has an adequate capacity to meet its long-term financial commitments relative to those of other Indonesian obligors. However, adverse economic conditions or changing circumstances are more likely to weaken its capacity to meet its financial commitments.

The corporate rating reflects PSAB’s sizeable mining reserves and resources, expectations of low cash cost, and the high demand for gold. The rating is constrained by the heightened refinancing & liquidity risk, its aggressive capital structure, exposure to the fluctuation of gold prices and unfavorable weather, and risks related to the development of new mines

The Company’s inability to address its refinancing and liquidity issues for the next several weeks may trigger multiple rating downgrades.

The outlook may be revised to stable if PSAB is able to successfully resolve its refinancing and liquidity issues related to its loans, including its maturing Bonds for the next 6 months. We may raise the rating if PSAB significantly improves its financial flexibility including the availability of committed funding sources to support the completion of its Doup project and its overall recovery of its business risk profile.

PSAB was established in 2002 under the name PT Pelita Sejahtera Abadi and commenced mining operations in 2012 after acquiring assets from Avocet Mining. Its operations cover the exploration, mining, and processing of gold. It has a geographically diverse portfolio of assets across Indonesia and Malaysia, specifically in Penjom, Malaysia; Seruyung, North Kalimantan; and Bakan, Lanut, Pani, Doup, Bolangitang, and Bulagidun in North Sulawesi. The Company owned three producing mines, one mine in construction stage, one mine in the development stage, and two mines in the exploration stage. As of June 30, 2021, its shareholders consisted of Jimmy Budiarto (92.50%), Sanjaya J (0.02%), and the public (7.48%). (ends)