PRESS RELEASE: Moody's assigns B2 senior unsecured PGN notes
Monday, February 2 2004 - 07:50 AM WIB
Hong Kong, February 02, 2004 -- Moody's Investors Service has assigned a B2 senior unsecured foreign currency rating to the proposed US$150 million notes due 2014 issued by PGN Euro Finance 2003 Ltd and guaranteed by PT Perusahaan Gas Negara (PGN).
At the same time, Moody's has affirmed the Ba3 senior implied local currency rating and B1 local currency issuer rating of PGN.
The B2 rating is therefore constrained by the foreign currency country ceiling for Indonesia.
The rating outlook is stable.
Proceeds of the proposed notes will primarily be used to finance PGN's continuing investment in the gas transmission projects.
These securities will be sold in a privately negotiated transaction without registration under the Securities Act of 1933 (the "Act") under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance has been designed to permit resale under Rule 144A.
The Ba3 senior implied local currency rating reflects PGN's solid operating and financial profiles on a standalone basis. Moody's notes that a major portion of PGN's current debts outstanding are soft loans borrowed by the Government of Indonesia (GOI) from international credit agencies for on-lending to PGN, but these loans are not subject to cross default on GOI's other debt obligations, therefore allowing PGN to be rated higher than the GOI on a local currency basis.
PGN has large capital expenditure over the next few years mainly to fund the South Sumatra - West Java transmission pipelines project which has been approved by the government, and the planned Duri - Medan transmission project, at a total cost of approximately US$ 1 billion. Moody's also understands that PGN will tender for other transmission projects under the government's Master Plan, which will further increase its capital expenditure requirement. The projected growth in debt and the relatively high dividend payout ratio will weaken PGN's financial profile, resulting in negative free cash flow position until all projects are completed. Moody's draws comfort from the company's financial policy to maintain Debt/Cap not exceeding 70%, the pre-funded nature of most of these projects through long term debts and PGN's projected growth in operating cash flow, which is sufficient to cover its scheduled debt service requirement over the next few years.
Moody's notes that PGN had launched an IPO at the end December 2003, which raised US$144 million new equity and reduced the shares in it by GOI to 61% from 100%. The original rating has already factored in the impact of this IPO exercise.
The B1 local currency issuer rating reflects PGN's structural subordination to its 60%-owned subsidiary TGI, which will contribute approximately 50% of the group's projected operating profits in the next 3 years.
PT Perusahaan Gas Negara, headquartered in Jakarta, Indonesia and 61% owned by the Government of Indonesia, is engaged in the transmission and distribution of natural gas in the country, with leading domestic market shares. (end of release)