Polytama's secured notes rated B2<\/p>\n
JAKARTA (JP): Moody's Investor Service has assigned a B2
\nrating to the proposed $200 million guaranteed secured notes due
\n2007 of Polytama International Finance B.V.<\/p>\n
The notes are guaranteed by PT Polytama Propindo (Polytama),
\nan Indonesian chemical company.<\/p>\n
This is the first time Moody's has rated the debt of either of
\nthese entities.<\/p>\n
Moody's said Thursday that positive factors supporting the B2
\nrating include Polytama's position among the leading local
\nproducers of polypropylene (PP) in Indonesia, a competitive
\nposition that benefits from tariff protection, and a feedstock
\nprice structure that offers the company the potential to mostly
\navoid what Moody's expects will be higher prices for the
\nfeedstock propylene in Asian markets.<\/p>\n
Factors limiting the rating include the company's small
\nrevenue base and narrow product slate, high financial leverage
\nand limited financial flexibility, and significant margin
\nvolatility attributed to the cyclicality of its products and raw
\nmaterials.<\/p>\n
The possibility of further disruptions to feedstock supplies,
\nas the company experienced on several occasions since commencing
\nproduction in 1995, could also impact margin volatility and
\nrepresents a risk to the firm's profitability, Moody's added.<\/p>\n
Formed in 1993, Polytama is a small, non-integrated Indonesian
\npolypropylene producer with a nameplate capacity of 180,000 tons
\nper year, making it the second largest supplier of PP in local
\nmarkets, where the primary end-uses include food packaging,
\ncarpet backing, woven sacks, yarns and ropes.<\/p>\n
A very low level of per capita consumption of plastics in
\nIndonesia supports a favorable growth outlook for PP demand.<\/p>\n
During 1996, the first full year of operation, the company
\nproduced roughly 138,000 tons of PP, generating sales of Rps. 279
\nbillion ($US117 million) and net profits of Rps. 35.2 billion.<\/p>\n
On a pro forma basis (including interest costs on the new debt
\nand assuming a higher average net profits approximate Rp 20
\nbillion and generate EBITDA\/interest of just under 2.0 times,
\naccording to Moody's analysis.<\/p>\n
However, near term profits and coverage measures are expected
\nto come under pressure as PP supply is expected to exceed demand
\non global markets.<\/p>\n
In the medium term, dividends from Polytama II should raise
\nthe level of earnings and cash flow. Polytama's competitive
\nposition and product pricing benefit from the current 40 percent
\ntariff on imported PP.<\/p>\n
However, this advantage is likely to erode over time given the
\ngovernment's position to reduce tariffs gradually as agreed with
\nother ASEAN countries by 2003.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/polytamas-secured-notes-rated-b2-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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