Moody's rates Davomas bonds B2

Moody's Investors Service said it assigned a provisional B2 senior secured debt rating to the proposed dollar-denominated bonds of Davomas International Finance Co. Pte. Ltd. and guaranteed by Indonesia-based PT Davomas Abadi Tbk. The agency also affirmed Davomas Abadi's B2 corporate family rating. The outlook is stable.

Davomas Abadi plans to use proceeds to expand its cocoa-bean grinding capacity and refinance all outstanding debt.

Moody's said the ratings reflect Davomas Abadi's key credit strengths: its position as a sizable player in the Indonesian cocoa grinding market, its cost competitiveness relative to its international peers, its hedging strategy to minimize price risk and match orders with cocoa bean supply and the role of the outsourcing trend practiced by branded chocolate players as a long-term industry growth driver.

The ratings also reflect the commodity nature of cocoa beans and price fluctuations for cocoa products, evidence of customer concentration risk and the absence of long-term sales contracts, the company's lack of back-up bank facility and its track record for default and debt restructuring, the agency said.

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