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)