Release: Fitch: Berau Coal on watch evolving following notes redemption plan

Fitch Ratings-Jakarta/Singapore-08 December 2009: Fitch Ratings has today placed PT Berau Coal's (Berau) Long-term foreign and local currency Issuer Default Ratings (IDRs) of 'B+' and National Long-term rating of 'A(idn)' on Rating Watch Evolving (RWE). At the same time, Fitch has placed the 'B+' rating on the USD325m senior notes due 2011 issued by Empire Capital Resources Pte Ltd and guaranteed by Berau on RWE.

The rating action follows Berau's offer via a Notice of Redemption to redeem the senior notes due 2011 on 28 December 2009, prior to their maturity. While Berau has not communicated the reason for the early redemption, Fitch believes that it is due to a potential change in Berau's controlling shareholder.

Fitch will reassess Berau's credit profile following the completion of the notes redemption, and the receipt of information with regards to Berau's new financing and business plans. Fitch has previously stated that Berau's ratings may be revised upwards if its financial leverage, as measured by the net debt/EBITDA ratio, is sustained below 2.5x and downwards if the same measure is sustained above 3.0x. However, in addition to these leverage guidelines, Fitch will also take into consideration any potential changes in Berau's operations and governance following the completion of the pending transactions.

Berau is Indonesia's fifth-largest coal producer and operates under a 30-year Coal Contract of Work. It reported revenues and EBITDA of USD573.9m and USD227.2m respectively, for the nine months ended September 2009. (end of release)