S & P puts Matahari on CreditWatch listing

S & P puts Matahari on CreditWatch listing

JAKARTA (JP): Standard and Poor's Corp has put PT Matahari
Putra Prima's BB corporate credit rating and Matahari
International Finance Co. B.V.'s Rp 237 billion (US$100 million)
notes' BB rating on a CreditWatch list for developing
implications.

The rating agency said yesterday the CreditWatch listing
followed the retail giant Matahari Putra Prima's recent
announcement of a proposed restructuring of its share holding,
where control of the company was likely to pass to the Lippo
Group's subsidiary, PT Multipolar Corporation.

Multipolar, under the proposal, would obtain a 50.1 percent
stake in Matahari Putra Prima, including a 45 percent interest
now held by Matahari's founder, Hari Darmawan.

The agency said the involvement of Lippo group and Multipolar,
which operates several foreign retail franchises in Indonesia
including WalMart and J.C. Penny, would widen Matahari's retail
focus and increase its efficiency in inventory management and
procurement of store sites.

"The association with Multipolar would benefit Matahari in
terms of reduced competition in retail industry and increased
scale of retail operations all of which could lead to a rating
upgrade," Standard and Poor said.

It said the ratings could be downgraded if the financial risk
of the combined groups outweighed Matahari's potentially improved
business position or indicated a deteriorating financial
performance.

It said the financial strength of Matahari's new structure was
not yet clear, in terms of Multipolar's and Lippo's
creditworthiness, the ownership of Multipolar by Matahari
executives, the ultimate financing of Multipolar's investment in
Matahari and the support provided to operations and finance.

The acquisition depended on a meeting of Multipolar
shareholders on Jan. 30, the rating agency said.

The agency said it would seek to clarify business and
financial issues arising from the transaction to resolve the
CreditWatch listing after the meeting.

For the first six months of 1996, Matahari booked a net profit
of Rp 29 billion, up from Rp 21 billion for the same period in
1995, the company earlier reported.

Its net sales was also rose to Rp 935 billion from Rp 670
billion in the same period.

Matahari currently operates 70 stores in 29 cities. (04)