S&P gives 'B+' to APP Finance's $300m notes
S&P gives 'B+' to APP Finance's $300m notes
JAKARTA (JP): International rating agency Standard and
Poor's has assigned a 'B+' long-term rating to APP Finance
Mauritius Ltd.'s US$300 million liquid yield option notes due in
2012.
The rating outlook was stable, the rating agency said in a
statement yesterday.
The $300 million notes were irrevocably and unconditionally
guaranteed on an unsecured and unsubordinated basis by the parent
company, Asia Pulp and Paper (APP), a flagship company under the
Indonesia-based Sinar Mas Group.
"The funds from this issue will help finance planned
expansions, principally in China and Malaysia," Standard and
Poor's said.
As the new projects would not generate free cash flow for
several years, financing commitments would be serviced from APP's
stand-alone operations as the export agent for the group, with
interest earned on surplus funds and management fees.
Standard and Poor's said it had also given a 'B+' corporate
credit rating to APP, with a stable outlook.
"APP's rating reflects its stand-alone credit profile, the
structural subordination of the company to its leveraged
operating subsidiaries and APP's position as a flagship company
in the diversified Sinar Mas Group," it said.
APP, a Singapore-based forest product group, is 86.2 percent
owned by APP Global Ltd., a company controlled by the Sinar Mas
Group.
APP has integrated operations of forestry management, pulp
manufacture, fine paper and industrial paper manufacture and
paper distribution.
Its subsidiaries include PT Indah Kiat and Paper, PT Pabrik
Kertas Tjiwi Kimia, PT Lontar Papyrus Pulp and Paper Industry and
PT Pindo Deli Pulp and Paper Mills.
Standard and Poor's said the APP group's operating cash flow
would continue to be positive, but its internally-generated funds
would unlikely be sufficient to meet its substantial and ongoing
capital commitments.
"Financial measures have the potential to improve in the
longer term, with planned equity issues and some asset
restructuring; however, ratings will continue to be constrained
by the group's ambitious growth plans and aggressive financing,"
it said.
While well established on several large-scale sites in
Indonesia, the APP group more recently has expanded its
operations to India and China and is committed to a large pulp
mill in Malaysia. (rid)