S&P lowers Tjiwi Kimia debt rating

S&P lowers Tjiwi Kimia debt rating

JAKARTA (JP): Standard & Poor's announced on Friday it lowered the senior debt ratings and corporate credit ratings of P.T. Pabrik Kertas Tjiwi Kimia Tbk. to 'D' from triple-'C'-plus and, at the same time, removed the ratings from CreditWatch.

This action follows the company's failure to make scheduled Feb. 1, 2001, interest payments totaling US$43.3 million on two senior debt issues. The two issues provide for a grace period of five and 30 days, Standard & Poor's said in a statement.

However, the growing liquidity problems of the company's parent, Asia Pulp & Paper Co. Ltd. (APP), make payments within the grace period a challenging scenario.

Ratings on APP, its other operating subsidiaries - P.T. Indah Kiat Pulp & Paper Corp. Tbk., P.T. Pindo Deli Pulp & Paper Mills, P.T. Lontar Papyrus Pulp & Paper Industry, and APP China Group Ltd. (APP China) - and their guaranteed subsidiaries, are lowered to triple-'C'-minus from triple-'C'-plus, and remain on CreditWatch with negative implications.

In the event Tjiwi Kimia does not cure its interest payment defaults within the respective grace periods, an acceleration of debt in APP and its other subsidiaries could result, which would seriously exacerbate the liquidity problems across the entire group.

The highly integrated nature of the group's operations, including wholly and majority-owned subsidiaries and affiliated companies owned by APP's controlling shareholders that hold the group's main forest resources, make further defaults by some or all of the rated companies likely to follow.

Standard & Poor's further said it would regard as a default any debt restructuring that requires creditors to take a reduction in value of their financial exposure to the group.

Although the APP parent is domiciled in Singapore, the location of the bulk of the group's subsidiaries and operating assets in Indonesia and China would make it very difficult for creditors of the group to protect and enforce their rights and remedies, if a series of defaults unfold.