S&P gives Pindo Deli Finance BB-rating

JAKARTA (JP): Standard & Poor rating agency yesterday assigned the US$400 million guaranteed senior notes of Pindo Deli Finance Mauritus a BB- (minus) rating.

Pindo Deli Finance Mauritus' senior notes will be issued in two tranches due 2002 and 2007 by parent PT Pindo Deli Pulp and Paper Mills.

S&P also gave its "BB" corporate credit rating to Pindo Deli, the second-largest subsidiary in the Asia Pulp & Paper Co. Ltd. (APP) group.

The rating agency said the corporate credit rating outlook is stable.

It said the rating reflected Pindo Deli's solid position in the strongly growing Indonesian and regional Asian paper products sector, vertical integration with 80 percent PT Lontar Papyrus Pulp & Industry, low-cost pulp and paper operations and a high level of operational integration within the APP group.

While the proceeds of the unsecured note issue would be used to refinance a portion of Pindo Deli's existing secured debt facilities, secured debt would remain at about 18 percent of total debt after refinancing, it said.

Pindo Deli intended to further reduce secured debt in the future through further unsecured debt issues, modest equity issues and asset divestments, S&P said.

If secured debt is reduced, the rating for the note issue could be equalized with that of the corporate credit rating, it said.

S&P said Pindo Deli was a significant operating entity in the APP group.

Its subsidiary Lontar was able to produce 545,000 metric tons of pulp per year to supply Pindo Deli, the APP group's commercial and industrial paper converters and produce market pulp, it said.

Lontar's pulpwood needs are met through an exclusive long-term supply contract with related company, PT Wirakarya Sakti, which has long-term forest concessions.

Current installed paper-making capacity, comprising eight small-to-medium scale machines, is about 217 tons per year.

Two new paper machines will be operational by the end of the year, increasing capacity by 450,000 tons a year.

Further tissue capacity of 120,000 tons per year is expected to begin by the end of next year.

APP, 86.5 percent owned by holding company for the Sinar Mas Group, has integrated operations in forestry management, pulp manufacture, fine paper and industrial paper manufacture and distribution.

The group recently expanded its operations to India and China and is committed to constructing a large pulp mill in Malaysia. (das)