S&P lowers Indonesian ratings, outlook negative
JAKARTA (JP): Standard & Poors has cut Indonesia's long-term foreign currency rating to BB-plus from BBB-minus and its local currency rating to BBB-plus from A-minus.
The Melbourne office of the U.S. rating agency said Wednesday the outlook on the ratings was negative.
The downgrades reflect the government's diminished fiscal and balance of payments flexibility, it said.
The rating agency also said in a statement made available to The Jakarta Post it had also taken actions on seven Indonesian companies.
It said that it was lowering Bank Negara Indonesia's foreign- currency rating to BB-plus/B from BBB-minus/A-3. The bank's rating remained on creditwatch negative.
S&P said it had also lowered the foreign currency rating of PT Hanjaya Mandala Sampoerna to BB-plus from BBB-minus, and its long term local currency rating to BBB from BBB-plus. The ratings outlook was revised to negative from stable.
It lowered the foreign currency rating of PT Citra Marga Nusaphala Persada to BB-plus from BB-minus and revised its outlook to negative from stable. It affirmed the group's local currency rating of BBB-minus with a stable outlook.
S&P also lowered the foreign currency rating of PT Satelit Palapa Indonesia to BB-plus from BBB-minus, and revised its outlook to negative from stable.
S&P said it had affirmed Satelindo's local currency rating but revised its outlook to negative from stable.
S&P said the local and foreign currency ratings of PT Daya Guna Samudera, PT Mulialand, PT Polysindo Eke Perkasa and PT Barito Pacific Timber were all affirmed at BB-plus. The outlooks for their foreign currency ratings were revised to negative from stable while the local currency ratings remained stable.
S&P said the ratings changes for the seven corporates followed the downgrading of the ratings of the Republic of Indonesia.
It said the foreign currency obligations of the affected corporate entities faced increased currency transfer risk consistent with the government's lower rating.
IPP project
Standard & Poor's Corp. said on Wednesday it lowered its ratings on four Indonesian independent power producers (IPP) to BB-plus from BBB-minus.
The projects remain on creditwatch negative, where they were placed on Dec. 1.
The downgrades are a direct result of S&P's downgrade of its rating of Indonesia's long-term foreign currency ratings to BB- plus from BBB-minus, the rating agency said.
The ratings apply to:
- Paiton Energy Funding BV's senior secured bonds due 2014, guaranteed by PT Paiton Energy Co.
- CE Indonesia Funding Corp.'s bank loan.
- DSPL Finance Co. BV's US$150 million 9.12 percent senior secured notes due 2010, guaranteed by Dayabumi Salak Pratama Ltd.
- MNL Indonesia Funding Corp.'s US$250 million bank loan.
The downgrade explicitly indicates the increased risk of inconvertibility of the rupiah to U.S. dollars and transferability of U.S. dollars out of Indonesia.
All the IPP projects have electricity tariffs with the state- owned electricity company PT Perusahaan Listrik Negara (PLN) that are either denominated in dollars or payable in rupiah but indexed to dollars.
To the extent that Indonesia's reserves become more limited, PLN may find it more difficult to access dollars while its call on the hard currency needed to honor IPP obligations will increase with new IPPs coming on line, S&P said.
S&P said it noted the Dayabumi project has already come on line and has been paid for its October 1997 deliveries.
S&P said it placed IPPs on creditwatch due to a potential shift in government support for PLN and the IPP program, which increases the uncertainty of PLN's ability to honor contracts.