Singapore (Indonesia Today) – Moody’s Investors Service has downgraded the corporate family rating and senior secured bond rating of Bumi Resources to B1 from Ba3, but the the ratings outlook is stable.
“The downgrade reflects the expected deterioration of Bumi’s credit metrics and liquidity as a result of Bumi’s (1) weakening operating margins, (2) large capex plans, as well as (3) debt and interest servicing burdens,” says Simon Wong, a Moody’s Vice President and Senior Analyst.
“The company’s plans to prepay part of the China Investment Corporation (CIC) debt of up to USD600million by end-2012 are insufficient for Bumi to maintain a financial profile in line with its previous ratings,” says Wong, who is also Moody’s lead analyst for Bumi.
“Furthermore, it has to rely on the sale and settlement of Bumi’s other financial assets, rather than operating cash flow, and the timing of which remains uncertain,” adds Wong. “Moody’s is also concerned with scheduled debt maturities of over USD300m in 2013, which will increase Bumi’s liquidity pressure.”
“Bumi’s EBITDA margin is expected to decline to around 22-24% for 2012, from 32.9% in 2011, owing to the continued rise in the company’s production costs and lower average selling prices,” adds Wong. The margin pressure and slower-than-expected production ramp-up have limited its operational cash flow generation.
Moody’s said that although Indonesian miners are one of the lowest-cost coal producers in the world, their production costs have escalated in recent years due to a combination of higher oil prices, rising labor and contractor costs and increased stripping ratios to facilitate their growth.