Moody's rates Golden Agri Aa3.id

Moody's Investors Service said it affirmed Golden Agri-Resources Ltd.'s Ba3 corporate family rating and assigned Aa3.id national scale corporate family rating.

The outlook is stable.

"The affirmation follows GAR's announcement that it will issue approximately US$400 million of convertible bonds," Virginia Chung, a Moody's analyst, said in a written statement. "The proceeds of the bonds will be used to finance the acquisition of shares in PT SMART Tbk, fund its capex plans and for general corporate purposes."

"The increase in leverage from this issue is mitigated by the favorable demand for crude palm oil (CPO), as well as by GAR's leadership in the Indonesian oil palm plantation industry and its vertically integrated business model," Chung said. "The ratings will continue to consider GAR's exposure to cyclical CPO prices and the risks of operating in Indonesia."

"While GAR's projected financial profile will likely be weakened due to its debt-funded expansion plan, its key coverage ratios of adjusted debt-to-EBITDA of 2 to 3 times and adjusted debt-to-capitalization of 20% to 25% remain healthy for its current rating. The final Ba3 rating further considers the execution risk involved in the expansion plan, the company's history of debt restructuring and family-controlled organizational structure," Chung said.

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