Moody's rates Indika Inti bond B2

Moody's Investors Service said it assigned a provisional B2 corporate family rating to PT Indika Inti Energi and a provisional B2 rating to the proposed $250 million senior secured bond due 2012 to be issued by Indo Integrated Energy BV and guaranteed by Indika.

The outlook is stable.

The bond proceeds will be used to refinance $103 million of corporate debt, to repay a $16 million account payable, to acquire an Indonesian coal mine for $60 million and to fund a $40 million investment in two power plant projects. The remaining $31 million of proceeds will be used for general corporate purposes.

The agency said the B2 rating reflects strong dividend cash flows from Indika's 46% stake in PT Kideco Jaya Agung, the strong shareholder agreement between Indika and Samtan Co. Ltd. of South Korea in respect of their majority ownership of Kideco, a strong relationship with Samtan and Indika's 100% ownership of the Tripatra Group of companies.

At the same time, the rating reflects Indika's high degree of reliance on dividend income from Kideco; the variability of that income, which will be needed to service debt; execution risk over the next 12 to 18 months with regard to the successful completion and integration of various new acquisitions; underlying sensitivity to coal and oil prices; the private ownership structure and dominant shareholder at the Indika level; and uncertainty pertaining to the regulatory environment for the coal mining industry in Indonesia, Moody's said.

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