Pertamina launches $5 billion global medium term note program | Company data
(Insider Stories) - Indonesian state-owned energy company PT Pertamina has launched a US$5 billion medium-term note program this week, with people close to the deal saying that Barclays Capital, Citigroup and Royal Bank of Scotland are joint lead arrangers and PT Mandiri Sekuritas is a co-arranger.
Pertamina is embarking on an ambitious capital expenditure program that will see it outlay almost $37 billion over the next three years to boost output and reserves, and is likely to fund much of this via debt in order to tap low interest rates for Indonesian issuers amid strengthening investor confidence the country.
Fitch Ratings Inc. has assigned a BBB- rating to the bonds, the agency’s lowest investment grade rating, as the company is a key state-linked entity and as Indonesia’s only refiner and dominant retailer of petroleum products, it receives subsidies in exchange for selling certain products – over half its sales – below market price. Fitch says it expects Pertamina’s credit metrics to weaken from 2012 levels as it increases capex and investment in the medium term, but says that “despite likely negative free cash flows in the next few years, [it] expects Pertamina’s liquidity to remain adequate, as its strong state linkages provide the company with access to banks and debt markets.”
Moody’s Investors Services has assigned the bonds a provisional Baa3 rating, the lowest investment grade, and says the rating reflects the company’s importance as Indonesia’s only refiner and a major upstream supplier, while the company operates with low cost and moderate leverage. It said it “expects Pertamina’s leverage to rise” due to the capex program,” but expects “operating and financial metrics to remain strongly supportive of its rating, despite its ambitious capex plans,” and warned that a downgrade would be possible if the capex program fails to boost production or reserves meaningfully, or if Pertamina “continues to stretch its balance sheet by taking on additional debt.”
Standard & Poor’s Ratings Services said it has assigned its BB+ and axBBB+ ratings to the issue, reflecting its long-term corporate rating for Pertamina of BB+, a notch below investment grade.
A statement from Fitch on its rating of the Pertamina bonds is attached below, while the statement from Moody’s is available at this link. S&P’s statement is available here.
Fitch Rates Pertamina’s GMTN Programme ‘BBB-’_ USD Bonds ‘BBB-(EXP)
