Moody's Downgrades Bayan Resources' Outlook to Negative, Here is Why

Moody’s Ratings (Moody’s) has revised the outlook for the conglomerate owned by Low Tuck Kwong, PT Bayan Resources Tbk. (BYAN), to negative from its previous stable rating. However, the rating agency maintained the corporate family rating (CFR) at Ba1.

“This negative outlook reflects regulatory uncertainty regarding production quota allocations, which has prompted Bayan to declare force majeure. If not resolved promptly, this uncertainty could limit production and weigh on profits,” said Anthony Prayukmo, Assistant Vice President at Moody’s Ratings, in a statement on Friday (18/09/2026).

Despite this, Prayukmo noted that the credit metrics of the mining sector issuer remain strong, supported by its debt-free balance sheet. “However, the ongoing uncertainty surrounding quota approvals poses a downside risk to its ability to achieve production growth,” Prayukmo added.

As is known, on 14 September 2026, Bayan declared force majeure on its coal supply obligations following delays in obtaining approval from the Indonesian government for the revision of its annual mining production quota increase. Without the revised quota, Bayan’s production is expected to drop to approximately 39 million metric tonnes (MT) in 2026 from around 68 million MT in 2025.

He continued that even if the quota is eventually increased, the uncertainty surrounding the annual approval process reduces clarity regarding Bayan’s ability to secure the production allocations necessary to increase output towards its full capacity of approximately 80 million MT in the coming years.

This uncertainty limits the company’s ability to plan production, reliably meet contracted delivery commitments, and realise the profit and cash flow growth previously anticipated.

“If the company’s application for a quota revision is not approved, we expect Bayan’s EBITDA to fall to approximately US$700 million in 2026 from around US$1.1 billion in 2025, primarily due to significantly lower sales volumes,” he stated.

If production remains around 39 million MT in 2027, the agency expects EBITDA to fall further to approximately US$400 million - US$500 million, based on an assumed average selling price of US$48/MT, which is below the expected realised price for 2026.

“In this scenario, earnings will remain well below our previous estimates of around $1 billion per year, which assumed sustained production growth towards the company’s production capacity of 80 million MT,” he said.

Despite these pressures, Bayan’s credit metrics will remain very strong. Moody’s expects the company to finance capital expenditure for production capacity expansion and infrastructure primarily through internal cash flows, thereby reducing the need for additional debt. Consequently, “we expect Moody’s adjusted debt-to-EBITDA ratio to remain below 0.5x over the next two years,” he said.

The Ba1 CFR rating for Bayan reflects its position as one of Indonesia’s largest thermal coal producers, its long mine reserve life, strong profitability supported by a low-cost structure, excellent liquidity, and a prudent financial policy.

Bayan will maintain excellent liquidity over the next 18 months with adequate internal cash and projected operating cash flows to fund capital expenditure and dividend payments. The company also has an approved but undrawn working capital facility of approximately US$650 million from banks as of the end of June 2026.

Given the negative outlook, an upgrade is unlikely within the next 12-18 months.

The outlook could return to stable if Bayan demonstrates its ability to consistently secure the necessary production quota allocations to maintain production, earnings, and cash flow, while maintaining excellent liquidity, a conservative financial policy, and a prudent approach to investment and shareholder dividend distribution.

“We could downgrade if operational disruptions, including prolonged delays in production quota approvals or prolonged force majeure events, materially weaken Bayan’s production, earnings, cash flow, or liquidity. We could also downgrade if changes in ownership or control lead to a more aggressive financial policy, higher debt ratios, increased shareholder dividend distributions, or greater related-party exposure,” he concluded.

For information, shortly after the force majeure announcement, BYAN Management reported a corporate action regarding the transfer of controlling shares. The company’s founder, Low Tuck Kwong (Dato’ Dr. Low Tuck Kwong), along with his daughter, Elaine Low, signed a Conditional Sale and Purchase of Shares Agreement with PT Jhonlin Baratama as the buyer on 16 September 2026.

PT Jhonlin Baratama is part of the Jhonlin Group owned by Andi Syamsuddin Arsyad, also known as Haji Isam.

Based on information disclosures submitted to the Financial Services Authority (OJK), this transaction includes a plan to transfer 10,000,000,500 (ten billion five hundred million) ordinary shares in PT Bayan Resources Tbk.

However, the completion of the entire transaction remains subject to several conditions precedent.

Bayan Resources Director, Jenny Quantero, explained that once the entire transaction process and all conditions precedent are fully completed, PT Jhonlin Baratama will officially hold 10,000,000,500 ordinary shares in the company.