S&P lowers Daya Guna Samudra's rating to 'SD'

S&P lowers Daya Guna Samudra's rating to 'SD'

JAKARTA (Dow Jones): Standard & Poor's Friday lowered its long-term corporate credit rating on P.T. Daya Guna Samudera, an Indonesian fishing concern, to 'SD' (selective default) from double-'C'.

Also, the double-'C' rating on the US$225 million notes due 2007, issued by DGS International Finance Co. B.V. and guaranteed by Daya Guna, remains on CreditWatch with negative implications.

The agency said the rating action follows Daya Guna's failure to repay short-term loans of US$83 million to its bank creditors since 1999.

S&P said the financial obligation arose from its need to reimburse creditors under trade receivables discounting facilities when Daya Guna's customers failed to meet payments on the receivables to the banks.

It said the CreditWatch placement reflects Daya Guna's liquidity problems and lack of financial flexibility. The weak credit quality of Indonesia's banking system and volatility in the rupiah have severely restricted the company's funding options, and the company has been forced to fund most of its own working capital.

The company also faces negative operating cash flows with production levels hurt by ongoing unrest near its main fishing grounds in the Arafura Sea, and processing operations at Benjina and Kimaan, in Maluku in eastern Indonesia.

Daya Guna also has negligible cash of about $6.5 million at December 1999, and a lack of working capital facilities.

S&P said while it sold its vessels to help meet its interest payment in June 2000, concerns remain about it ability to raise enough cash to meet its interest payment, due Dec. 1, of US$11.3 million on its U.S. dollar notes issue.