Moody’s Revises Down Indosat Outlook to Negative

Moody’s Investors Service has revised the outlook on PT Indosat’s Ba1 corporate family ratings and senior unsecured ratings to ‘negative’ from ‘stable’. The downward revision is affecting the company’s debt securities of around US$344 million.

"The revision in outlook to negative is driven by our expectation that Indosat's adjusted debt/EBITDA will rise above 3.0x and remain there for a prolonged period, and that financing requirements during 2010 will increase the company's proximity to financial covenants," Ivan Palacios, a Moody's AVP and analyst said.

"We expect Indosat's operating performance to improve over the coming year, but the improvement in revenues, EBITDA, and resulting cash flows will not be sufficient to lower leverage to less than 3.0x during 2010," said Palacios, also Moody's lead analyst for the company.

Moody's said it expects Indosat's liquidity to “remain tight over the near to medium term, as we forecast that cash on hand and cash flow from operations will not be sufficient to cover capex, working capital, and debt service requirements alone.”

“This deficit, which we expect will be largely debt-funded, could limit Indosat's headroom under financial covenants and constrain the company's financial flexibility,” it said. As a result, the company may seek new debts to refinance its US$235 million notes due in November this year.

Indosat (ISAT) gained 0.87% to Rp5800 on Thursday. At that price, Indosat has market capitalization of Rp30 trillion. (Roffie Kurniawan)

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