Moody's ups Bakrie Sumatera view to positive

Moody's Investors Service said it changed to positive from stable the outlook for Bakrie Sumatera Plantations Tbk's B2 corporate family rating and secured bond rating on its $160 million notes.

The action follows Bakrie's completion of its Rp1.6 trillion rights issue. The proceeds will be used to fund its expansion plans, including the acquisition of two palm oil plantations, Moody's said.

The company also announced that it has invested $10 million in a 20% stake in Agri Resources BV, a subsidiary of Agri International Resources Pte Ltd. (rated B2/stable). Bakrie will manage the plantations and crushing mills, the agency said, and off-take 100% of the crude palm oil and palm kernels produced by Agri Resources.

The equity issuance will reduce financial risk for future debt-funded acquisitions and the plantation acquisitions will increase cash flows and improve scale economies, Moody's said. Bakrie's debt-to-EBITDA ratio is expected to improve to 3x or lower in the next couple of years, which would potentially support a high B rating, the agency said.

However, the acquisitions will more than double Bakrie's palm plantation assets. Such an aggressive growth plan carries execution risk, especially given its modest size when compared to its peers, Moody's added.

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