Fitch cuts three palm oil producers

Fitch Ratings said it downgraded the national long-term ratings of Sinar Mas Agro Resources and Technology Tbk., PT Ivo Mas Tunggal and Sawit Mas Sejahtera to A(idn) from AA-(idn).

“The ratings for the three entities, which are based on the consolidated profile of Golden Agri-Resources Ltd. (GAR), have been downgraded as GAR’s leverage has remained high due to CPO price weakness and other factors. Fitch’s computation of GAR’s net adjusted debt to EBITDAR leverage ratio, including corporate guarantees but excluding any inventory-related benefit, was 7.4x in 2018 and we expect it to increase to 8x in 2019,” said Fitch in a press release.

Fitch said it expects GAR to breach a bank loan covenant in 2019 due to weak earnings, but the company should be able to get a waiver or relaxation given its strong banking relationships.

The outlook is negative.

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