APP's rating implication negative<\/p>\n
JAKARTA (AFX-ASIA): Standard & Poor's said it has revised the
\nCreditWatch implications on its CCC+ long-term local and foreign
\ncurrency ratings on Asia Pulp & Paper Co Ltd (APP) and its
\noperating subsidiaries to negative from developing.<\/p>\n
\"This action reflects the dwindling prospects for affordable
\nrefinancing of APP's upcoming maturities as a result of the
\ndecline in its debt prices and equity market valuation since the
\ncompany filed a consent and exchange offer with the U.S.
\nSecurities and Exchange Commission last September,\" S&P said.<\/p>\n
\"As such, Standard & Poor's believes that the prospect of an
\nupgrade from the CCC+ level is unlikely in the near term,\" it
\nsaid.<\/p>\n
It said the ratings of APP and its operating subsidiaries,
\n\"reflect significant refinancing pressure for the APP group,
\nresulting from its heavy debt maturity schedule over the next few
\nyears and the exposure of its mill and resources to Indonesia's
\nrisky political, economic, legal, and regulatory environment,\" it
\nsaid.<\/p>\n
The agency said the company's particular challenges have been
\ncompounded by the slowing U.S. economy, which has contributed to
\na general weakening of pulp and paper prices, and deterioration
\nin the high-yield debt market generally, leaving APP vulnerable
\nto any adverse developments on a number of fronts.<\/p>\n
\"Although the commissioning of recently constructed mills and
\ngreater expansion into Chinese and Japanese markets will
\nstrengthen cash flow and diversify country risks, the debt
\nreductions needed to achieve a longer-term financial equilibrium
\nare only likely if the company can raise significant cash through
\nasset sales or new equity issuance,\" it said.<\/p>\n
The agency said even if APP, the parent of Tjiwi Kimia and
\nIndah Kiat, is successful in raising external funds, funding is
\nlikely to remain costly and refinancing uncertain in the medium
\nterm. Moreover, failure to obtain new sources of funding could
\nput the group in a severe liquidity squeeze.<\/p>\n
\"APP's heavy use of the high-yield market ... now leaves it
\nexposed to that market's current lack of liquidity,\" it said.<\/p>\n
\"This, in turn, has driven risk premiums to potentially
\nunmanageable levels despite the benefits of the low operating
\ncash costs, extensive operational integration, access to abundant
\nfiber, and diversity of production facilities and end markets
\nthat the company enjoys.\"<\/p>\n
It said although the company's modern, low-cost mills have
\nlong been the subject of interest from major forest products
\ncompanies, the volumes of debt outstanding and exposure of prime
\nassets to the risky Indonesian environment, \"make the raising of
\nsufficient funding at affordable prices or reasonable values an
\nuncertain prospect.\"<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/apps-rating-implication-negative-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}