U.S. markets closed
  • S&P Futures

    4,413.25
    +23.75 (+0.54%)
     
  • Dow Futures

    35,001.00
    +169.00 (+0.49%)
     
  • Nasdaq Futures

    15,034.00
    +78.25 (+0.52%)
     
  • Russell 2000 Futures

    2,240.20
    +18.60 (+0.84%)
     
  • Crude Oil

    72.96
    -0.99 (-1.34%)
     
  • Gold

    1,814.60
    -2.60 (-0.14%)
     
  • Silver

    25.53
    -0.01 (-0.05%)
     
  • EUR/USD

    1.1878
    +0.0003 (+0.02%)
     
  • 10-Yr Bond

    1.2390
    -0.0300 (-2.36%)
     
  • Vix

    18.24
    +0.54 (+3.05%)
     
  • GBP/USD

    1.3894
    -0.0012 (-0.09%)
     
  • USD/JPY

    109.6810
    +0.0660 (+0.06%)
     
  • BTC-USD

    39,939.52
    -1,966.15 (-4.69%)
     
  • CMC Crypto 200

    967.39
    +17.48 (+1.84%)
     
  • FTSE 100

    7,032.30
    -46.12 (-0.65%)
     
  • Nikkei 225

    27,742.28
    +458.69 (+1.68%)
     

Chandra Asri Petrochemical Tbk (P.T.) -- Moody's affirms Chandra Asri's Ba3 rating; outlook stable

·16 min read

Rating Action: Moody's affirms Chandra Asri's Ba3 rating; outlook stableGlobal Credit Research - 23 Apr 2021Singapore, April 23, 2021 -- Moody's Investors Service has affirmed the Ba3 corporate family rating (CFR) of Chandra Asri Petrochemical Tbk (P.T.) (CAP).At the same time, Moody's has affirmed the Ba3 rating on CAP's senior unsecured notes. The notes were issued by CAP and guaranteed by its subsidiaries, Styrindo Mono Indonesia (P.T.) and Petrokima Butadiene Indonesia (P.T.).The rating outlook remains stable."The rating affirmation reflects our expectation that CAP's credit metrics will improve in 2021 and be supportive of its Ba3 rating, with adjusted debt/EBITDA at around 2.8x over the next 12 months," says Hui Ting Sim, a Moody's Analyst. "The company also has very good liquidity, with an inclination to hold large cash balances that mitigate risks stemming from margin cyclicality.""However, CAP's credit profile will be exposed to execution and funding risks if it proceeds with the development of a second petrochemical complex, for which final investment decision will be made in 2022," adds Sim.RATINGS RATIONALEMoody's expects that higher product spreads for commodity chemicals in 2021 will drive an increase in CAP's adjusted EBITDA to around $300 million in 2021 from $200 million in 2020. Prices for commodity chemicals have already strengthened in the early months of 2021 because of higher oil prices, supply outages and a degree of global economic recovery. The completion of CAP's methyl tert-butyl ether and Butene-1 plants in the third quarter of 2020 will also contribute to higher earnings.CAP's leverage, as measured by adjusted debt/EBITDA, will decline to 2.8x in 2021 from 4.4x in 2020. CAP's financial profile remains highly exposed to the cyclicality of margins in the petrochemical industry, but its large cash holdings mitigates such risks. As of December 2020, the company is in a net cash position, with cash and cash equivalents of $919 million against a total reported debt of $844 million.Capital spending at CAP will be low at around $60 million-$80 million per year if the company does not proceed with the construction of its second petrochemical complex, which it estimates will cost $4 billion-$5 billion. Because of the coronavirus pandemic, CAP has delayed to 2022 its final investment decision on the project. High proportion of debt in the funding mix for the project will be credit negative.Moody's expects CAP to maintain its very good liquidity over the next 18 months, with sufficient cash to cover its scheduled debt maturities of $160 million as well as projected dividends and capital spending of around $80 million and $115 million, respectively.CAP's Ba3 rating also reflects the company's leading position in Indonesia's (Baa2 stable) petrochemical market, but is constrained by its asset concentration in the Indonesian island of Java.ESG CONSIDERATIONSCAP's operations within the commodity petrochemical sector are exposed to high environmental risks, primarily related to waste and pollution. These risks are mitigated by the company's continuous efforts to prevent the negative impact of waste and emissions through investments and asset optimization. Over the last two years, there have been zero incident reported by the company in its operations.As the leading integrated petrochemical company in Indonesia, CAP's social risks are also elevated, given the increased social concern over single-use plastics, plastic waste and plastic recycling. The government's ban on single-use plastic bags in some regions in Indonesia, which came into effect in 2020, could lower domestic demand for polyethylene. Nevertheless, the impact on CAP is unlikely to be material. According to company, the grade of polyethylene sold by CAP for single-use plastic bags contributed less than5% of its total revenue in 2020.CAP has also initiated sustainability programs to support the government in dealing with plastic waste, including implementing the construction of plastic asphalt roads and waste bank management in Cilegon.CAP's operations are exposed to safety risks, which are mitigated by the company's solid safety record. There were no fatalities or lost-time accidents reported in 2020.In terms of governance risks, Moody's has considered CAP's concentrated ownership by Barito Pacific and its primary shareholder, Prajogo Pangestu. This risk is mitigated by the board's oversight, exercised through the presence of the strategic minority shareholder, Siam Cement Group, through SCG Chemical, and three independent commissioners on its seven-member board.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe stable rating outlook reflects Moody's expectation that CAP's credit metrics will continue to improve over the next 12 months while the company maintains very good liquidity.Moody's is unlikely to consider an upgrade until there is clarity on CAP's decision and funding plan on the development of its second petrochemical complex.CAP's rating could be downgraded if the company's credit metrics deteriorate, such that (1) its leverage remains above 3.0x over an extended period; (2) its liquidity deteriorates, such that its cash balance falls below $100 million; or (3) the company initiates large incremental debt-funded expansion projects.The principal methodology used in these ratings was Chemical Industry published in March 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1152388. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Chandra Asri Petrochemical Tbk (P.T.) (CAP) is a commodity petrochemical company operating the only naphtha cracker in Indonesia. The company, which is listed on the Jakarta Stock Exchange, was established in January 2011 after the merger of PT Chandra Asri and PT Tri Polyta Indonesia Tbk.As of January 2021, CAP's key shareholders were Barito Pacific Tbk (P.T.) and its primary shareholder, Prajogo Pangestu, which hold an effective stake of around 62%; and Siam Cement Group through SCG Chemicals Company Limited (SCG Chemical), one of Thailand's largest integrated petrochemical companies, which holds a 30.57% stake.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Hui Ting Sim Analyst Corporate Finance Group Moody's Investors Service Singapore Pte. Ltd. 50 Raffles Place #23-06 Singapore Land Tower Singapore 48623 Singapore JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Vikas Halan Associate Managing Director Corporate Finance Group JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Releasing Office: Moody's Investors Service Singapore Pte. Ltd. 50 Raffles Place #23-06 Singapore Land Tower Singapore 48623 Singapore JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. ​