S&P: PT Pertamina's US$1.137 billion senior unsecured term loan assigned 'BB+' rating
Friday, December 6 2013 - 10:35 AM WIB
The issue rating is the same as the long-term corporate credit rating on Pertamina (BB+/Stable/--; axBBB+/--). The company expects to use the proceeds to fund working capital and capital expenditure, and for general corporate purposes.
The rating on Pertamina incorporates the company's 'bb+' stand-alone credit profile (SACP) and our view of an "almost certain" likelihood that the government of Indonesia would provide timely and sufficient extraordinary support to Pertamina in the event of financial distress. We assess that the company plays a "critical" role and has an "integral" link with the government of Indonesia (BB+/Stable/B; axBBB+/axA-2).
Pertamina's SACP reflects the company's "fair" business risk profile and "significant" financial risk profile, as our criteria define the terms. We expect the government to continue to influence Pertamina's business risk profile. The company benefits from more generous production sharing contracts, and has preferential access to newly released exploration blocks and expiring cooperation contracts. Pertamina's public service obligation (PSO) to distribute fuel in the domestic market at government-designated and below-market prices tempers these benefits. Pertamina has weaker margins than its integrated oil and gas peers because of the PSO.
The stable outlook on Pertamina is consistent with the outlook on the sovereign credit rating, given that the company is highly sensitive to government influence. We expect Pertamina to remain the government's primary vehicle for distributing subsidized fuel throughout the country. Our view is based on the company's integrated operations, dominance in Indonesia's upstream and downstream oil and gas segments, and the strong demand prospects for energy in Indonesia. (ends)