RELEASE: S&P: Leighton Indonesian finance arm rating BB-
Monday, October 17 2005 - 08:10 AM WIB
MELBOURNE (Standard & Poor's) Oct. 17, 2005--Standard & Poor's Ratings Services today assigned its 'BB-/Stable/--' foreign currency and 'BB/Stable/--' local currency corporate credit ratings to Leighton Finance International Ltd. (LFI). The ratings reflect the credit quality of the unrated joint guarantors, PT Thiess Contractors Indonesia (TCI) and PT Leighton Contractors Indonesia (LCI), and a degree of implied support provided by the Australia-based parent Leighton Holdings Ltd. (Leighton; BBB+/Negative/-). LFI is a 100%-owned subsidiary of Leighton whose sole purpose is to raise finance to support TCI and LCI activities.
TCI and LCI's activities comprise contract mining and civil construction in Indonesia, which are integral to Leighton's core operations. Indonesia offers Leighton significant long-term growth opportunities (with margins that reflect the risk of operating in Indonesia) and acts as a source of earnings and contracting diversification. Indeed, already TCI and LCI made a significant contribution to the Leighton group's profit before tax, both in fiscal 2005 and for the five-year period leading up to fiscal 2005.
"Although Leighton does not guarantee the debt obligations at LFI, Standard & Poor's has incorporated a level of implied support in the rating, reflecting the strategic importance of TCI and LCI to the group. The stand-alone credit quality of TCI and LCI would be marginally weaker than the 'BB' corporate credit rating assigned to LFI," said Craig Parker, credit analyst, Corporate & Infrastructure Finance Ratings group.
TCI and LCI have aggressive financial profiles. At June 30, 2005, the combined debt to capital of TCI and LCI was about 85% and this is likely to remain at about this level over the medium term. TCI is the larger entity by asset size, at US$417 million, and generated EBITDA of US$137 million at June 30, 2005. This is much larger than LCI's assets of US$101 million and EBITDA of US$19 million.
The stable outlook on LFI reflects the expectation that TCI and LCI will continue to win profitable contracts with margins that reflect the risk of operating in Indonesia; further diversify their counterparty and contract exposure; and continue to benefit from the technical and financial support provided by Leighton, while maintaining an aggressive financial profile. (end of release)