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Indika bond slump leads to level downgrade

Bond traders are pushing PT Indika Energy’s notes deeper into junk as weak coal prices dim the outlook for dividends from its mining units, according to CreditSights Inc

The Jakarta Post
Jakarta
Fri, December 5, 2014

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Indika bond slump leads to level downgrade

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ond traders are pushing PT Indika Energy'€™s notes deeper into junk as weak coal prices dim the outlook for dividends from its mining units, according to CreditSights Inc.

The company'€™s $300 million 7 percent notes due May 2018 have dropped 4.35 cents in the past six days to 84.792 cents on the dollar, Bloomberg-compiled prices show. Yields jumped to 12.613 percent from 10.869 percent. The securities have lost 10 percent in the past month as corporate dollar debt in Indonesia gained 0.6 percent, a JPMorgan Chase & Co. index shows.

'€œThe market seems to be pricing a two-notch downgrade into current yields,'€ Singapore-based analysts Raghav Bhandari and Sandra Chow wrote in a note published on Wednesday. '€œA recovery in coal prices would provide a welcome boost to the sector but we doubt prices will rebound fast enough to turn around the performance of distressed names.'€

Indika'€™s debentures, sold at par in 2011, are ranked B1 by Moody'€™s Investors Service and B+ by Fitch Ratings Ltd., or four levels below investment grade, both with a negative outlook. Asian benchmark coal prices remain near their lowest since 2009, a level that was reached earlier this month.

Rewina Isnanto, a Jakarta-based spokeswoman for Indika, could not immediately comment on CreditSights'€™ analysis when reached by phone on Thursday. (***)

 

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