The Company Owned Prajogo Pangestu Gets IDA Rating From Pefindo: Its Bonds Are Stable

Conglomerate Prajogo Pangestu. (Photo: Doc. Barito Pacific)

JAKARTA - PT Pemeringkat Efek Indonesia (Pefindo) re-established the IDA (International Development Association) rating for PT Barito Pacific Tbk (BRPT) and The Sustainable Bonds I Barito Pacific.

The outlook for the company's rating owned by conglomerate Prajogo Pangestu was revised to "stable" from "negative" reflecting Pefindo's view of the improved liquidity position of BRPT in the short to medium term.

"This is in line with the potential cash inflows in the form of dividends from subsidiaries in the energy sector of Salak and Darajat assets in addition to Wayang Windu assets that have been distributing dividends since 2019", explained Pefindo's statement in information disclosure, quoted Tuesday, April 13.

Salak and Darajat Assets, a subsidiary of Star Energy, issued $1.11 billion in bonds in October 2020 to pay off syndicated loans that had previously limited dividend distribution to BRPT.

In December 2020, BRPT received a dividend income of $56 million from Salak and Darajat assets and paid off $50 million which were part of a $200 million loan facility from Bangkok Bank.

On the other hand, pt Chandra Asri Petrochemical Tbk. (TPIA) performance that improved in the fourth quarter of 2020 is also expected to be maintained in the following quarters. This is in line with expectations of better economic conditions compared to 2020 and economic recovery in China, which improves demand for petrochemical products and their selling prices.

"Obligors with IDA ratings have a strong ability compared to other Indonesian obligors to meet their long-term financial commitments. Nevertheless, the ability of obligors may be affected by changes in bad economic conditions and conditions compared to higher-ranking obligors", added Pefindo,

The rating reflects the strong market position of BRPT's main operating segments in the petrochemical business through PT Chandra Asri Petrochemical Tbk. and geothermal energy business through Star Energy Group Holdings (SEGH), good dividend distribution from its core subsidiaries, and geothermal energy segment that protects the sensitivity of the petrochemical industry cycle.

Meanwhile, such ratings are limited by moderate financial leverage, indirect access to the operating cash flow of subsidiaries, and risks inherent to the core segments of the Company's operations, in our view.

Pefindo's report also stated that the rating could be raised if BRPT's performance improves as reflected by the continuous improvement in the financial profile, especially financial leverage reflected by the improved debt to EBITDA ratio to less than 3.0x as a result of efforts to reduce debt and the ability to generate higher cash flow from the company's subsidiaries.

On the other hand, ratings may be downgraded if there is a sustained decline in the financial profile due to a narrowing gap in the petrochemical business or larger-than-projected debt without the ability to generate stronger cash flow.

Ratings can also come under pressure if there is a decrease in cash flow from subsidiaries, which could be triggered by the ongoing COVID-19 pandemic and lead to further weakening in the petrochemical sector, or natural disasters that severely affect the geothermal segment.

"The rating also does not take into account additional capital expenditures funded from debt for the construction of the second naphtha cracker under TPIA, as the final investment decision has not been finalized," he explained.

Barito Pacific is an investment holding company owned by Prajogo Pangestu, founded in 1979 ago. Currently, the company operates in two main segments, petrochemicals, and geothermal energy, through a majority stake in PT Chandra Asri Petrochemical Tbk and Star Energy Group Holdings.

The Company also operates in other segments, such as the processing of wood products and properties. As of December 31, 2020, the company's shareholders are Prajogo Pangestu (72.18 percent), PT Barito Pacific Lumber (1.21 percent), PT Tunggal Setia Pratama (0.34 percent), reacquired shares (0.60 percent), and others (25.67 percent).