S&P gives Barito Pacific BB'-plus rating<\/p>\n
JAKARTA (JP): Standard & Poor's said yesterday it assigned its
\ndouble-B'-plus corporate credit rating to PT Barito Pacific
\nTimber (BPT).<\/p>\n
According to the rating agency, the outlook is stable,.<\/p>\n
The rating reflects BPT's solid position in global hardwood
\nplywood markets supported by long-term, secure access to low cost
\nand abundant forest resources, and a moderate attitude to finance
\nasset growth, the agency's statement said.<\/p>\n
The rating also reflects the risks associated with the planned
\nconstruction of a large-scale pulp mill, to be operational by the
\nend of 1999.<\/p>\n
Currently solid finances will likely deteriorate, on a
\nconsolidated basis, over the period 1997 to 1999 as the pulp mill
\nis constructed.<\/p>\n
BPT is a significant entity in the Barito Pacific Group (the
\ngroup), a family-controlled group with diverse forestry,
\npetrochemical, manufacturing, and property interests, based in
\nIndonesia.<\/p>\n
The group also has significant minority investments in several
\nlarge Indonesian groups. These groups do not have any cross-
\nshareholdings with BPT, nor does BPT or the group guarantee the
\nobligations of these companies.<\/p>\n
Secure access to fast-growth forest resources ensures BPT can
\nsustain its position as a low cost plywood producer over the long
\nterm. BPT is Indonesia's largest hardwood plywood manufacturer,
\nexporting about 90 percent of its production, primarily to the
\nAsian region.<\/p>\n
While globally, plywood consumption growth is exhibiting
\nmaturity, and some vulnerability to substitute panels,
\nIndonesia's low-cost position has resulted in its industry
\ncontinuing to grow at the expense of higher cost producers.<\/p>\n
Plywood prices can be volatile, reacting to the purchasing
\nbehavior of the largest importer countries, Japan and China.<\/p>\n
Indonesia's single desk export marketing association, Apkindo,
\nhas demonstrated some influence over pricing dynamics, leading to
\nprice stability relative to other globally traded forest
\nproducts.<\/p>\n
Since listing as a public company in 1993, BPT has maintained
\nsignificant liquidity and only modest debt levels. The IPO
\nprovided the funds to permit the company to further develop its
\nforestry concessions, to reduce debt, and to provide the equity
\nfor the pulp mill.<\/p>\n
Over the next two to three years, while the pulp mill is being
\nconstructed, BPT's finances will likely deteriorate, though
\nremain satisfactory for the rating.<\/p>\n
BPT has no experience in pulp manufacture and marketing.
\nHowever, BPT is mitigating the risks of entering a new forestry
\nsector through securing fiber supply from its own plantation
\nacacia forest, entering a fixed price turnkey construction
\ncontract with an experienced contractor, bringing in partners
\nexperienced in pulp mill management and pulp marketing, funding
\n70 percent of the project with long term funds under which there
\nis limited recourse to the shareholders, and securing markets for
\nall of the mill's pulp through take-or- pay contracts with two
\ncustomers.<\/p>\n
Nevertheless, the construction and commissioning risks for the
\npulp mill are significant.<\/p>\n
Standard & Poor's expects the company will leverage its
\nbalance sheet over the long term up to 50 percent, consolidating
\nthe pulp mill. Leverage at this level, and likely cash flow and
\ninterest cover protection, will likely limit the rating to the
\npresent category. Yet the rating provides BPT with the latitude
\nto pursue its strategic growth ambitions leveraging off the
\nforest resources, Standard & Poor's said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/sp-gives-barito-pacific-bb-plus-rating-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}