Moody’s drops Indika Energy, notes to Caa1

Moody's Investors Service said it downgraded the corporate family rating of Indika Energy Tbk. to Caa1 from B3.

At the same time, the agency downgraded the ratings on the $171 million notes due 2018 and issued by Indo Energy Finance BV, as well as the ratings on the $500 million notes due 2023 and issued by Indo Energy Finance II BV, to Caa1 from B3.

The two bond issuing entities are wholly-owned subsidiaries of Indika and both notes are unconditionally guaranteed by Indika.

The outlook is negative.

The actions conclude the review initiated on Jan. 22 when Moody’s placed the ratings on review for downgrade, reflecting its effort to recalibrate ratings in the mining industry to align with the fundamental shift in the credit conditions faced by the global mining sector.

"The downgrade of Indika's CFR to Caa1 reflects the company's elevated leverage, driven largely by the impact of weak thermal coal prices across Indika's businesses," Moody's vice president and senior analyst Brian Grieser said in a news release.

"The downgrade also incorporates our view that Indika's cash flows will diminish materially in 2017."

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