Vinacomin downgraded to BB- from BB

JAKARTA: Standard & Poor's Ratings Services said today that it had lowered its long-term corporate credit rating on Vietnam National Coal and Minerals Industries Holding Corp Ltd (Vinacomin) to BB- from BB. The outlook is stable. "We also lowered the
Wandrik Panca Adiguna | 06 Desember 2010 04:23 WIB

JAKARTA: Standard & Poor's Ratings Services said today that it had lowered its long-term corporate credit rating on Vietnam National Coal and Minerals Industries Holding Corp Ltd (Vinacomin) to BB- from BB. The outlook is stable. "We also lowered the issue rating on the proposed senior unsecured notes to BB- from BB. We subsequently withdrew the issue rating as the notes have been indefinitely postponed," said an official statement obtained by Bisnis today.S&P downgraded Vinacomin to reflect its view of the low likelihood of extraordinary government support to the company from the government of Vietnam (foreign currency BB/Negative/B; local currency BB+/Negative/B; ASEAN scale axBBB/axA-2) in the event of financial distress. The view is based on the assessment of a limited link and role that the company's creditworthiness represents to the government. Consequently, we lowered the corporate credit rating on Vinacomin to the level that reflects its stand-alone credit profile (SACP). S&P assesses the company's SACP at bb-, reflecting the company's fair business risk profile and aggressive financial risk profile. "The change in our view of extraordinary government support to Vinacomin to low from extremely high is based on our observation of the recent developments in the restructuring of another government-related entity (GRE)--Vietnam Shipbuilding Industry Group (Vinashin)," said Standard & Poor's credit analyst Wee Khim Loy. "There has been increasing uncertainty surrounding Vinashin's payment of its foreign currency indebtedness in the next 30 days and our expectation is that Vinashin might default on this debt." The rating on Vinacomin reflects the company's sizable capital expenditure needs of more than US$4.4 billion over the next 2 to 5 years and the associated high execution risks (particularly in its foray into bauxite extraction and alumina production), susceptibility to regulatory risk, and the high risk of operating in Vietnam.The stable outlook reflects our expectation that Vinacomin's operating performance will remain stable. (wiw)

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