Moody's rates Gajah Tunggal bonds B2

Moody's Investors Service said it assigned a B2 senior unsecured rating for PT Gajah Tunggal Tbk's proposed $95 million bonds, and affirmed its B2 corporate family rating and B2 senior unsecured rating for existing $325 million bonds, guaranteed by Gajah Tunggal.

The outlook is negative.

The outlook will be reverted to stable upon completion of the proposed bond issuance, Moody's said. The bond mitigates Moody's previous concern of high refinancing risks faced by the company, the agency said, whereby it would need to rely on external funding to meet substantial debt repayment before the end of 2008.

The rating continues to reflect Gajah Tunggal's dominant and competitive position in the Indonesian domestic tire market, its worldwide expansion and its low cost structure, Moody's said.

These positive factors are offset by the company's comparatively small size on a global scale, high financial leverage and projected negative free cash flow, the agency added.

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