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INDORAYON SENIOR NOTES RATED 'BB' BY DUFF & PHELPS

 CHICAGO, Sept. 29 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has assigned a preliminary initial rating of "BB" (Double-B) to P.T. Inti Indorayon Utama's (Indorayon's) proposed issue of senior notes. The issue, expected to approximate $75 million, will rank pari passu with existing senior debt.
 A key consideration in our rating is Indorayon's low operating costs, which will allow the generation of positive operating cash flows even during conditions of low product prices. This sustainable cost advantage is principally the result of access to low cost timber supplies and low labor costs relative to its world-wide competitors. Low operating costs are especially critical in the pulp industry, which is widely recognized as being highly cyclical and capital intensive.
 Indorayon also benefits from its location near the rapidly growing paper and textile markets of Southeast Asia, which are characterized by high growth rates in GDP and growing per capita consumption of paper and textiles. We also recognize, however, that new competing pulp, and eventually rayon, facilities may limit the benefits of this demand growth accruing to Indorayon.
 Our rating of Indorayon also recognizes its short operating history. In particular, Indorayon is in the final phases of a $250 million expansion which will double its sales and lead to the production of rayon fiber. Indorayon must meet production volume, quality ana?rketing chall en s in order to realize the cash flow benefits of this expansion.
 Indorayon's expansion program has resulted in an increase in debt to about 45 percent of capitalization (excluding usance LOC's which are expected to be retired using offsetting deposits over the next year). Since rayon fiber production is only now in its start-up phase, and due to weak pulp pricing, recent historical financial ratios are below a "BB" rating. Our rating incorporates the expectation that the rayon fiber plant meets management's production goals and that current pulp prices will eventually recover from their cyclical lows. EBDIT coverage for 1992 was only 2.0 times; this ratio should exceed 3 times in 1994 if the rayon plant produces at full capacity even if pulp and rayon prices remain at current low levels.
 Indonesia's historical record of strong economic growth with low inflation are the primary reasons we consider the Indorayon rating to be largely unaffected by sovereign risks, including the relatively high level of foreign debt, underdeveloped capital markets and lack of clear political succession to President Suharto.
 -0- 9/29/93
 /CONTACT: William T. Hayes, CFA, 312-368-3142, or David L. Roberts, Ph.D., 212-908-0221, both of Duff & Phelps Credit Rating Co./


CO: P.T. Inti Indorayon Utama ST: IN: PAP SU: RTG

TS -- NY043 -- 6812 09/29/93 12:11 EDT
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Publication:PR Newswire
Date:Sep 29, 1993
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