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JAKARTA—Fitch Ratings on Monday placed Indonesia-based
PT Berlian Laju Tanker Tbk’s (BLT) long-term foreign and
local currency Issuer default ratings of ‘BB-’ (BB
minus) on Rating Watch Negative (RWN), following the
company’s announcement Sunday that it plans to acquire
Chembulk Llc (Chembulk), a Marshall Islands-registered
chemical tanker company, for $850 million.
Fitch
has also placed the ‘BB-’ (BB minus) rating of the
$400-million senior unsecured notes due 2014 issued by
BLT Finance B.V. and guaranteed by BLT on RWN.
Funding
for the acquisition will primarily be in the form of new
debt of $750 million raised at both the BLT and Chembulk
levels. Fitch estimates that BLT’s financial leverage,
as measured by the net debt/Earning Before Interest,
Taxes, Depreciation and Amortization (EBITDA) ratio,
will rise significantly from the 2.7x level attained in
H107. The net adjusted debt/EBITDA ratio, which adjusts
the leverage ratio by capitalizing operating lease
payments, will also rise sharply from the 3.5x level
attained in H107, as five out of Chembulk’s 16 vessels
are chartered-in.
However,
BLT plans to reduce its postacquisition debt levels by
raising new equity and disposing some of its noncore
assets. The degree of a potential negative rating
action, if any, will be dependent on the level of BLT’s
debt reduction after the transaction. If new cash
infusion into the company is not significant, a
downgrade by more than one notch may be warranted, given
the resultant high financial leverage despite the
prevailing high freight rates.
However,
the ratings may be affirmed if BLT is able to
demonstrate that current financial leverage levels can
be maintained.
The
transaction is subject to BLT shareholder approval, and
will likely achieve closure in the last three months of
this year. Fitch intends to resolve the RWN upon closure
of the transaction, following further discussions with
BLT’s management regarding its financing and
deleveraging plans.
Fitch
views the transaction as modestly positive from the
operational perspective as it will further increase
BLT’s scale. The combined entity will be the
third-largest stainless steel chemical tanker operator
in the world. Furthermore, BLT will gain further
geographical diversification as the acquisition will
allow it to enter the North American market.
BLT is
an Indonesia-based shipping company, focusing on liquid
bulk cargo, with operations primarily in
Asia with some expansion into the
Middle
East and Europe. In 2006, BLT achieved revenue of $335
million, EBITDA of $154 million and net income of $107
million. The founder, Mr Hadi Surya, has a 48.7-percent
beneficial interest in BLT.
In a
separate report datelined Singapore, BLT, Indonesia’s
biggest shipping company by market value, will buy the
company and its fleet from Chembulk Holdings Inc., the
Jakarta-based company said in a statement to the
Singapore stock exchange Monday.
The
purchase of the owner of 11 chemical tankers will be
“immediately accretive” to its earnings and cash flows,
Berlian Laju said.
The
purchase will boost the Indonesian carrier’s debt, and
it will need new capital infusions, Fitch Ratings said
Monday.
“If new
cash infusion into the company is not significant, a
downgrade by more than one notch may be warranted,”
Fitch said in a statement.
The
ratings company also placed Berlian Laju’s long-term
foreign- and local-currency issuer default ratings of
“BB-” on negative watch, saying the company’s financial
leverage will “rise significantly” as it takes on debt
to fund the purchase.
The
transaction is “modestly positive” as it will further
increase Berlian Laju Tanker’s scale of business, Fitch
said.
Berlian
Laju rose 9.5 percent to 34.5 Singapore cents in the
city-state Monday, taking its gains this year to 19
percent.
That
lags behind the benchmark Straits Times Index’s
30-percent rally. Its Jakarta-traded stock added 13
percent during the period. Indonesian financial markets
are closed until October 17 for the Muslim Eid al-Fitr
festival.
Berlian
Laju wants to “grow faster” and may acquire a company in
Europe to expand its fleet, finance director Kevin Wong
said in a May 22 interview.
Chembulk’s fleet, which can carry between 16,400
deadweight tons and 32,000 deadweight tons, has an
average age of 3.7 years, compared with an industry mean
of 12 years, the company said in the statement.
---Bloomberg |
