Release: S&P rates Arpeni Pratama Ocean Line B+
Friday, April 21 2006 - 07:31 AM WIB
SINGAPORE (Standard & Poor's) April 20, 2006--Standard & Poor's Ratings Services said today that it assigned its 'B+' corporate credit rating to PT Arpeni Pratama Ocean Line Tbk. (APOL), a dry-bulk shipping company in Indonesia. The outlook is stable. At the same time, Standard & Poor's assigned its 'B+' rating to the proposed US$160 million seven-year senior unsecured notes to be issued by the company.
APOL intends to use a part of the net proceeds (about US$93 million) for refinancing existing debt, and the balance for capital expenditure and vessel financing. APOL is engaged in domestic and international shipment of commodities such as coal, pulp, forest products, crude oil, and gas.
"The rating reflects APOL's prominent position in the intra-Indonesian coal shipment market, favorable demand conditions and positive developments anticipated with the implementation of cabotage regulations," said Standard & Poor's credit analyst Anshukant Taneja. The company's ability to offer integrated cargo handling solutions, maintain high fleet-utilization levels, and the stability associated with its contract-based earnings also support the rating.
However, APOL's aggressive expansion plans, involving an outlay of about Indonesian rupiah (Rp) 1,287 billion (US$132 million) in 2006, weakened its credit-protection measures. The effect is further amplified, given prospects of oversupply in global dry-bulk shipping and expectations of downward pressure on freight rates in the near future.
"The high levels of product and client concentration and operating risks associated with APOL's small and aged fleet also adversely impact the rating," said Mr. Taneja. The impact of these trends could be partially mitigated by the regulatory benefits available to APOL, as the largest Indonesian fleet owner and the historically strong operating track record of the company.
For the year ended Dec. 31, 2005, APOL reported total revenues of Rp1,167 billion and net profit of Rp168 billion. APOL owned 43 vessels and chartered six others as of end 2005; the fleet has a total capacity of 664,000 deadweight tons and a weighted average age of 17 years.
The outlook on the rating is stable. Significant improvement in credit protection parameters, accompanied by higher business diversity and reduction in operating risks may improve the outlook or the rating. Conversely, deviations from current expansion and refinancing plans, higher-than-anticipated usage of debt, diminished liquidity, and a sharper downturn in the shipping cycle could weigh on the outlook and rating. (end of release)