S&P downgrades ratings on Freeport, ALatief
S&P downgrades ratings on Freeport, ALatief
JAKARTA (JP): International rating agency Standard & Poor's on
Thursday downgraded ratings on Freeport McMoran Copper & Gold
Inc. and PT ALatief Freeport Finance Co. BV., reflecting their
exposure to Indonesia's intensifying fiscal and political risks.
The downgrading changed Freeport's corporate credit rating
from B minus to triple C plus; its senior unsecured debt and
shelf from triple C plus to triple C; subordinated shelf from
triple C to triple C minus and preferred stock and preference
shelf from triple C minus to double C.
Rating on ALatief's senior unsecured debt was also lowered
from triple C plus to triple C.
"Most notably, the downgrading reflects past close ties
between Freeport and the former regime of president Soeharto and
the potential for retribution," Standard & Poor's said.
The downgrading also mirrors concern over the rising tide of
populism and uncertainty over the parliamentary and presidential
elections later this year.
"A new administration could seek increased wealth distribution
from foreign corporations like Freeport operating in Indonesia,"
it said.
Intensifying demands and also support for increased provincial
autonomy in Irian Jaya, where Freeport's primary asset is
located, would also likely affect the company's operation.
Freeport operates a massive, low-cost copper and gold mine in
Grasberg complex, Irian Jaya, with copper and gold reserves
totaling 51.3 billion pounds and 64.4 million ounces
respectively.
With copper and gold equity production in 1998 of 1.42 billion
pounds and 2.2 million ounces respectively, Freeport is one of
the largest producing copper and gold mines in the world.
"This is offset by Freeport's exposure to Indonesian political
risk, volatile commodity prices and aggressive financial
policies."
Standard & Poor's said opposition from the Indonesian
government over Freeport's recent request to increase production
from 300,000 tones of ore per day reflected the "increasingly
difficult operating environment and adverse political sentiment
in Indonesia". (rid)