Standard & Poor's; Berau Coal Energy downgraded to 'SD' following a moratorium

(Singapore (Standard & Poor's) July 9, 2015)--Standard & Poor's Ratings Services said today that it had lowered its long-term corporate credit rating on PT Berau Coal Energy Tbk. (Berau Energy) to 'SD' from 'CCC-'. At the same time, we lowered our long-term ASEAN regional scale rating on the Indonesian coal producer to 'SD' from 'axCCC-'. We also lowered our long-term issue ratings on the US$450 million notes due 2015 that Berau Capital Resources Pte. Ltd. issued and Berau Energy guarantees to 'D' from 'CCC-' and on Berau Energy's US$500 million notes due 2017 to 'CC' from 'CCC-'. We removed all the ratings from CreditWatch, where they were placed with negative implications on Jan. 21, 2015.

"We lowered the ratings on Berau Energy because we assess the company to have defaulted on certain financial obligations," said Standard & Poor's credit analyst Xavier Jean. That follows the granting of a moratorium by a Singapore court against legal and enforcement actions by holders of US$450 million notes due July 8, 2015, issued by Berau Capital, a subsidiary of Berau Energy.

We lowered the rating on Berau Capital's notes to 'D' because the moratorium constitutes an event of default under our criteria. The moratorium aims to facilitate Berau Energy's debt restructuring efforts and will remain in force until Jan. 4, 2016.

We lowered the ratings on Berau Energy's US$500 million notes due 2017 to 'CC' because the moratorium only covers debts issued by Berau Capital and excludes other debts issued by Berau Energy. Nevertheless, we believe a default or distressed exchange on those other debts is inevitable within the next six months because Berau Energy seeks to restructure its entire capital structure. (ends)