IQPlus, (07/12) - Fitch Ratings has upgraded Indonesia-based PT Indika Energy Tbk's Long-Term Foreign- and Local-Currency Issuer Default Ratings and outstanding senior US dollar notes, which are guaranteed by Indika. The upgrade reflects Indika's improved financial and liquidity profiles, which have been supported by stronger-than-Fitch-expected coal prices during the year.
We expect Indika to continue generating adequate cash flow and to maintain a healthy cash balance over the medium term, which should give it adequate flexibility to address its lumpy debt maturities, which we previously considered a rating constraint. We also expect Indika to maintain credit metrics appropriate for its rating over the rating horizon to 2022.
Stronger Liquidity and Financial Profile: Fitch expects Indika's financial profile to stay strong, supported by positive free cash flow over the next three years based on our coal-price assumptions. This should create sufficient liquidity to repay debt maturities starting from 2022.
Indika's unrestricted cash balance was about USD600 million as at end-June 2018 (2017: USD663 million), supported by strong operating cash flow. We expect leverage, as measured by FFO net leverage, to remain below 3.0x till 2020, a level we consider appropriate for Indika's rating, then improve to around 2.0x thereafter. Fitch takes a consolidated view of Indika to include its subsidiary, PT Kideco Jaya Agung, due to its 91% ownership of Kideco and strong accessibility to Kideco's cash flow - in addition to analysing Indika's holding company cash flow. (end)
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