Sampoerna's ratings upgraded by S&P

Sampoerna's ratings upgraded by S&P

HONG KONG (Reuters): Indonesian cigarette maker PT HM
Sampoerna saw its credit rating boosted above that of sovereign
risk on Thursday, but ratings agency Standard & Poor's said its
rare move was unlikely to be repeated elsewhere in the country.

"At this point there's no Indonesian corporate that springs to
mind," said Robert Richards, managing director of corporate and
government ratings for North Asia.

"Most of the ones we've rated have defaulted already, or in
many cases remain mired in default and their ratings have been
withdrawn," he said in a teleconference.

S&P upgraded its foreign currency rating on Sampoerna to B-
minus from CCC -- one notch above Indonesia's sovereign risk
rating of CCC-plus -- and hoisted its local currency rating to B.

"In raising the company's ratings above the ratings of the
Indonesian sovereign Standard & Poor's recognizes the company's
impressive business profile and effective financial management
since the Asian crisis, in contrast with the government's debt
restructurings and payment defaults by a number of government
enterprises," S&P said in a statement.

Sampoerna, the second-biggest cigarette manufacturer in
Indonesia, is the first Indonesian company to ever achieve a
corporate credit rating that exceeds the Indonesian sovereign
rating issued by S&P.

It is also only the second such case in Asia for S&P, the
first being Toyota Motor Corp, rated AAA with a negative outlook
versus Japan's AA-plus stable rating.

S&P said its move was justified as despite sovereign debt
problems in the wake of Asia's 1997/98 economic crisis Jakarta
had not stopped local firms having access to foreign currency.

Some skeptical

But some credit analysts were sceptical of the move.

"What you are doing is sending a signal to investors that
looking forward you do not expect the Indonesian government to
reverse its implied policy on the availability of foreign
exchange," a credit analyst at one U.S. investment bank said.

"I just don't feel confident enough that in a scenario where
Indonesia blows up, Sampoerna will be allowed to have access to
foreign capital," the analyst told Reuters.

"It is not a strategically important company and it has no
foreign currency earnings. Why should the government allow it to
make foreign exchange transactions if the government was unable
to pay its own foreign currency obligations?"

Responding to similar concerns raised during the conference
call, S&P's Richards said the ratings agency was "not saying that
it will never happen in the future", noting that the firm was
only rated one notch above the sovereign.

Sampoerna has total foreign currency debt of about US$76
million according to S&P, some $69.5 million of it in bonds.

Market sources said those bonds were bid at about 76 cents in
the dollar on Thursday, but the very tightly held paper had no
takers at that price.

"It doesn't move, but that tells you more about the view of
sovereign risk in Indonesia than it does about credit risk at
Sampoerna," one market player said.

Richards said that Sampoerna was one of Indonesia's better
corporate citizens.

"Sampoerna is being run by shareholders and the directly
controlling entity is trying to run it for the benefit for the
shareholders and secondly the creditors of the company, rather
than with national public policy objectives," he said.