Moody's lowers ABM Investama

Moody's Investors Service said it downgraded the corporate family rating of ABM Investama Tbk. to B1 from Ba3, along with the rating on its $350 million senior unsecured notes due 2022.

The outlook was revised to stable from negative.

The downgrades reflect an expectation that ABM's credit profile will weaken considerably following the loss of a key customer at its mining services subsidiary, PT Cipta Kridatama, Moody's said.

In March 2019, Cipta Kridatama stopped mining service operations at two mines owned by Indonesian thermal coal producer, Toba Bara Sejahtra Tbk., the agency said.

This follows the early termination of a contract at Toba Bara's third coal mine in December 2018, Moody's added.

As a result of the lost earnings from these contracts and because of medium-term price assumptions for thermal coal, the agency said it estimates that ABM's adjusted leverage will increase to about 3.6x in 2019, from about 2x in 2018.

Consequently, ABM's leverage is no longer in line with expectations for the previous Ba3 rating, Moody's explained.

ABM's business profile also has become less diversified, the agency said, and it is increasingly reliant on coal sales, which are subject to considerable price volatility.

ABM aims to partially offset the lost revenue by obtaining new customers, Moody's said.

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