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April 2, 2008 |
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BERLIAN LAJU: S&P Lowers Corporate Credit Ratings to 'B' Standard & Poor's Ratings Services lowered its corporate credit ratings on PT Berlian Laju Tanker Tbk. (BLT) to 'B' from 'B+'. At the same time, Standard & Poor's lowered to 'B' from 'B+' the ratings on the US$400 million senior unsecured notes due 2014 and on the US$125 million five-year convertible bond due 2012, issued by BLT Finance B.V., a wholly owned subsidiary of BLT. All these ratings remain on CreditWatch with negative implications. This rating action comes after a letter of notice from BLT's four Indonesian rupiah bonds' trustee regarding the company's failure to meet a "net-debt-to-equity ratio" covenant within these securities. "We believe BLT should be able to 'cure' this covenant violation given the 120-day timeline involved before a bondholders' meeting is convened to declare an actual default," said Standard & Poor's credit analyst Manuel Guerena. "As long as BLT's vessel disposals and sale-and-leaseback transactions are timely completed, its liquidity should be sufficient to meet its financial needs. We expect BLT to confirm and detail all these sales by the end of April 2008." The alleged breach, however, is larger than previously considered (see article titled "Bulletin: Rating On PT Berlian Laju Tanker Tbk. Unaffected By Failure To Meet Covenant," published March 14, 2008, on RatingsDirect), according to the referred letter of notice and BLT's audited financial statements, which translates into a larger amount of debt to be paid down. Such payment is likely to include the pay-down at maturity (May 28, 2008) of two out of the four unsecured rupiah bonds outstanding for an equivalent of US$42.4 million (the other two, amounting to an equivalent of US$94.6 million, mature on July 2012), plus at least a portion of its US$250 million bridge loan maturing December 2008. On top of the higher debt incurred for the acquisition of Chembulk Tankers LLC, BLT has gradually become more exposed to the current challenging conditions of the credit markets, reflecting a profile that is no longer in line with a 'B+' rating; this is more so if the company faces a working capital cash shortfall or other refinancing need. "A return to compliance on this covenant, along with BLT's delivering and executing its business and financial plan, is likely to result in a stable outlook on the ratings," Mr. Guerena said. "However, if a default is declared, the payment of its outstanding debt (approximately US$1.75 billion) would significantly stress the company's liquidity and financial standing, resulting in more immediate pressure on the current ratings." About PT Berlian Laju PT Berlian Laju Tanker Tbk is the largest Indonesian shipping company, focusing on liquid bulk cargo, with operations primarily in Asia with some expansion into the Middle East and Europe. In 2006, BLT achieved revenue of US$335 million, EBITDA of US$154 million and net income of US$107 million. The founder, Hadi Surya, has a 48.7% beneficial interest in BLT. |
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