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Berlian debt standstill may lead to massive restructuring

Monday, 13 February 2012 | 11:00
PT Berlian Laju Tanker (BLTA), the nation’s largest oil and gas shipping firm, has decided to freeze payment for US$418 million in debt due this year — out of the total $1.9 billion outstanding — in a move that could lead to massive restructuring or asset sales to avoid default.
The debt standstill for both bank loans and bonds was a move to buy time for the company to review its financial position and arrangements, following a covenant breach on a loan granted to an unidentified Berlian Laju subsidiary, for which Berlian Laju is the guarantor, the company said in a stock exchange filing late on Thursday.
“The global economic slowdown combined with the rapid global fleet growth of the past few years resulted in lower freight rates, which combined with higher bunker fuel costs as well as other operating costs that have significantly impacted the company’s business and financial position,” president director Widihardja Tanudjaja said in the document.
Berlian Laju has appointed FTI Consulting as financial advisor to assist on options for restructuring of operational activities and financial arrangements, as well as to carry out assessment on financial stance of the company.
The firm has started discussions with the relevant parties to restructure the relevant bank and lease facilities.
“While we expect that freight rates will recover in the coming periods, we have to take measures to enhance the efficiency of the company’s capital structure and augment its working capital to focus on ensuring uninterrupted quality operations and services to its customers and timely payments to its suppliers,” Widihardja said.
Fitch Ratings immediately placed Berlian Laju’s CCC rating, one grade above a default rating, on watch
negative, after downgrading the firm’s credit ratings last December over heightened liquidity risks.
The CC rating on $400 million senior notes due 2014, issued by BLT Finance B.V. and guaranteed by Berlian Laju, has also been put on ratings watch negative.
PT Indosurya Asset Management analyst Reza Priambada said Berlian Laju’s liabilities and cash were not comparable, so the company would find difficulties in paying debts which were double the amount of their Rp 9.33 trillion cash reserves.
“Now the way to repay their debts could be by gradual repayment or selling their assets,” he added, suggesting refinancing Berlian Laju’s debts to longer-term loans with lower interest rates to avoid default.
As reported earlier this week, trading of Berlian Laju’s shares had been suspended at both the Indonesia Stock Exchange (IDX) and Singapore Exchange (SGX) at the company’s request until it has fully assessed its financial position and made full disclosure to the market.
The shares have fallen by half in both Jakarta and Singapore over the past eight months to Rp 196 and 0.027 Singaporean dollars per piece, respectively, prior to the suspension.
However, shares of Berlian Laju’s subsidiary PT Buana Listya Tama Tbk (BULL) slumped 7.78 percent to a record low of Rp 83 apiece — almost half of the Rp 155 initial public offering (IPO) price in May of last year.
Source: Jakarta Post
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