Press Release: Fitch assigns expected rating to Indonesian Coal future flow securitization
Saturday, June 4 2005 - 02:31 AM WIB
Fitch Assigns Expected Rating to Indonesian Coal Future Flow Securitization
Fitch Ratings-Hong Kong/Singapore-03 June 2005: Fitch Ratings, the international rating agency, has today assigned an expected rating of 'BBB-' (BBB minus) to the US$600 million Series 2005-1 notes due 2012 (the "Notes") to be issued by Indocoal Exports (Cayman) Limited (the "Issuer").
The transaction is a structured export note backed by receivables (both existing and future) generated from the businesses of PT Kaltim Prima Coal ("KPC") and PT Arutmin Indonesia ("Arutmin"; together, "the seller parties"). The seller parties, which are respectively the second and the fourth largest coal producers in Indonesia, jointly accounted for approximately 29% of Indonesia's coal production in 2004. The seller parties are subsidiaries of PT Bumi Resources Tbk ("Bumi") and each operates under a Coal Contracts of Work ("CCOW") granted by the Indonesian government.
This transaction will be the first cross-border "stand-alone" future flow transaction in Asia since the Asian Financial Crisis. It will also be the first cross-border securitization from Indonesia since 1997.
The transaction's expected rating reflects the operating strengths of KPC and Arutmin as well as their substantial reserves, well-recognized products and established sales channels in the Asia Pacific region. In 2004, the sellers generated combined net sales of US$1.09 billion and operating income of US$292.5m. The transaction exhibits healthy projected coverage levels with a Fitch-adjusted base case averaging more than 4x maximum debt service over the life of the transaction (with lows reaching roughly 2.5x). The expected rating is also supported by various structural features that mitigate a number of corporate and market risks as well as sovereign risks and redirection/diversion risks with respect to payments, products and obligors.
As a future flow transaction, it relies on the ongoing production and export sale of coal even in the event of the bankruptcy or insolvency of either or both of the seller parties. Fitch assessed the transaction's ability to withstand an investment-grade stress using its going concern assessment ("GCA"), complemented by the incorporation of various structural features. The rating is capped by the GCA of the combined entity. Any deterioration in the credit quality of KPC or Arutmin may affect the GCA and, by extension, the rating of the notes. The 'BBB-' (BBB minus) expected rating exceeds the 'BB-' (BB minus) Long-term sovereign rating of the Republic of Indonesia.
The expected rating addresses the likelihood that cash flows generated by the assigned receivables will be sufficient to ensure timely payment of interest and principal on the notes over the life of the transaction.
Expected ratings do not reflect final ratings and are based on information provided to Fitch as of May 2005. Final ratings are contingent on final documents conforming to information already received as well as on satisfactory legal opinions.
A full presale report on the transaction is available from the Fitch website at www.fitchratings.com and Fitch's Asia website www.fitchratingsasia.com.
CONTACT: Hilary Tan, Hong Kong, Tel: +852 2263 9904; Charles Chang, Hong Kong +852 2263 9919.
Media Relations: Ching-Yuen Lock, Singapore, Tel: +65 6238 7301.