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of the ones we've rated have defaulted already, or in many cases remain mired in default and their ratings have been withdrawn," he said in a teleconference.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