Berlian Laju (BLT)

Berlian Laju (BLT): may be pressured after Fitch downgrades its Long Term Foreign and Local Currency Issuer Default Ratings to ‘CCC’ from ‘B-‘.
The rating on BLT's US$400m senior unsecured notes due 2014, issued by BLT Finance B.V. and guaranteed by BLT, have also been downgraded to 'CC' from 'CCC' based on a recovery rating of 'RR5'.
Given that the 'CCC' rating is driven by primarily by refinancing risks, no outlook has been assigned.

The downgrades reflect BLT's heightened liquidity risk as it has yet to secure refinancing for the IDR 1,153b (US$127.4m) domestic bonds that are maturing in May and Jul 2012. While the company had US$105.7m of unencumbered cash and US$88.9m as debt-oriented mutual fund investments at end-Sep 2011, Fitch notes that it is required to maintain a min cash balance of US$75m to comply with bank loan covenants. The agency estimates that these balances and projected operating cash flows are inadequate to repay the bonds falling due in 2012, especially in light of committed capex. Limited unencumbered asset balance of US$9m as at end-Sep 2011, makes refinancing a difficult proposition.

Even if BLT is able to refinance the 2012 notes, it faces looming debt maturities in 2013 and 2014. The co's US$125m convertible bond has a put option exercisable in Feb 2013 and is currently out-of-the-money. US$400m notes fall due in May 2014. In addition, BLT has US$297.2m of debt – mostly secured - that needs to be refinanced between 2012 and 2014.

Fitch notes that the outlook for BLT's key business of chemical tankers is stable and that the co has the advantage of being an early entrant in the profitable Indonesian cabotage business. The agency expects BLT's cash flow from operations to improve over the medium term given its significant presence in the chemical tanker and Indonesian cabotage businesses, though rising fuel costs may temper that.