S&P downgrades ratings of 3 firms

JAKARTA (JP): Standard & Poor's (S&P) announced yesterday it had downgraded three Indonesian corporations' credit ratings following the weakening of their credit quality and their ability to meet short-term obligations.

The three companies downgraded were property developer PT Mulialand, and petrochemical companies PT Polytama Propindo and PT Tri Polyta Indonesia.

The Melbourne branch of the U.S. rating agency said in a statement that it downgraded PT Mulialand's corporate credit rating to BB+ from BBB-, reflecting the difficulties the company was facing in settling with the remaining 37 percent of buyers in Taman Anggrek Condominiums (TAC).

TAC's delays have been caused by the rapid depreciation of the rupiah against the U.S. dollar and by high local interest rates.

The agency said with the project's final payments not being successfully collected within the anticipated timeframe and with weaker property sales conditions -- Mulialand would be burdened by higher debt levels and weaker operating cash.

The corporate credit rating of PT Polytama Propindo (Polytama) was also lowered to B- from B+ while the rating on Polytama International Finance B.V.'s US$200 million secured notes due in 2007 -- guaranteed by Polytama -- was downgraded to B- from B+.

The agency said the ratings were placed on the agency's credit watch with "negative implications" -- reflecting the company's uncertainty to meet its debt-servicing obligations in the next six months as a result of deteriorating cash flows and weak liquidity.

A material decrease in Polytama's cash balance and liquidity could lead to a lower ranking in the near future, the agency said.

Longer-term concerns include the company's worsening leverage as it takes on more debt to finance the construction of its Polytama II project, it added.

Publicly listed PT Tri Polyta Indonesia's corporate credit rating and the rating on Tri Polyta Finance B.V.'s $185 million guaranteed secured notes due in 2003, were lowered to B from B+, with a negative outlook.

The agency said the downgrading reflected a difficult and competitive operating environment leading to a likely deterioration of the company's operating cash flows and a worsening leverage position.

The outlook reflected S&P's expectation of continuing weak operating cash flows in the short and medium term for nonintegrated polypropylene producers in the Asian region, which could lead to a further deterioration of Tri Polyta's finances, the agency said.

The agency also said it would continue to monitor the portfolio of rated Indonesian corporations during the volatile economic conditions.

The rapid fall of the rupiah against the U.S. dollar in recent days, following four months of continued exchange rate depreciation, "has exacerbated the credit quality and profitability difficulties Indonesian corporations are facing," the agency said.

The tight liquidity of the Indonesian banking sector, the subsequent high interest rates and an expectation that economic growth will slow down in the near term, had also affected the companies' ability to service their debts, it said.

S&P also affirmed the B- corporate credit banking of PT Datakom Asia (Datakom), but revised its outlook from stable to negative.

S&P affirmed the B- rating on $260 million in notes due in 2005, issued by Pratama Datakom Asia B.V. and guaranteed by Datakom.

The agency said the rating reflected the company's de facto pay-TV monopoly status in Indonesia, strong shareholder support, and close relationship with Star TV.

These strengths were offset by the uncertainty of demand for pay TV services in Indonesia and the company's heavy debt usage, the agency said.

The negative outlook reflected Datakom's deteriorating business and financial profile in the long term, it added.

The agency said that Datakom largely relied on its local currency denominated subscription fees for generated cash flow, while the majority of its borrowings and programming costs were denominated in U.S. dollars.

The severe devaluation of the rupiah and expected economic slowdown in Indonesia had significantly increased Datakom's cost base and debt service burden and would impede its ability to generate positive cash flow in the next three years by driving up the subscriber break-even point, it said.

Moody's Investor Service said that it had also downgraded the rating on the $185 million guaranteed secured notes of PT Tri Polyta International Finance Company B.V. Indonesia to Caa1 from B3.

The notes are guaranteed by PT Tri Polyta Indonesia Tbk.

The rating reflected the severe margin squeeze that had primarily resulted from high feedstock costs and low product prices, which had been further aggravated by the sharp depreciation of the rupiah against the dollar, Moody's said. (gis)