S&P: IOI on watch

Standard & Poor's said it placed the BBB+ corporate credit rating on IOI Corp. Bhd. on CreditWatch with negative implications, after the company's announcement to issue up to $600 million in bonds, for funding its expansion, working capital and potential acquisition plans.

At the same time, the BBB+ foreign currency rating on the senior unsecured borrowings have also been placed on CreditWatch with negative implications, the agency said.

In addition to the announcement last week, S&P said that IOI had a capital-reduction exercise in April 2007 with Malaysian ringgit 1.3 billion in capital paid out to date and announced $130 million in acquisitions of palm oil plantations in Indonesia in August, reflecting a material shift in its financial profile and possibly the management's approach to growth and meeting its capital requirements.

"Although the impact of these recent investments has been somewhat alleviated by higher-than-anticipated palm oil prices, we consider the likelihood of IOI's financial metrics falling short of its current ratings to be high," said S&P credit analyst Joey Chew.

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