S&P cuts Kaltim Prima Coal outlook to negative

Standard & Poor's said it revised Indonesia-based PT Kaltim Prima Coal's outlook to negative from stable and affirmed the company's BB- corporate credit rating following the announcement by PT Bumi Resources Tbk. that it will sell its entire 95% stake in Kaltim Prima and PT Arutmin Indonesia to a consortium led by PT Borneo Lumbung Energi for more than $3 billion.

The outlook revision reflects S&P's concern that the company's financial risk profile could weaken if it significantly increases its debt level to help finance the acquisition of its shares. Considering the sizeable acquisition amount involved, it is possible that IndoCoal Resources (a special purpose vehicle for Bumi) may consider refinancing Kaltim Prima's $600 million securitized notes due 2012, which contain a covenant limiting Kaltim Prima's ability to incur additional debt.

The agency predicted that Kaltim Prima's operations should continue to function as normal, as the company has benefited in the past year from firm product prices of coal, and demand growth should continue, given a growing preference by various Asian countries for coal and its relatively low cost compared with oil and natural gas.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.