S&P rates Medco notes B

S&P said it assigned a B long-term issue rating to a proposed issue of dollar-denominated senior unsecured notes issued by Medco Platinum Road Pte. Ltd.

The notes are guaranteed by PT Medco Energi Internasional Tbk.

The proceeds will be used to refinance the company's existing debt maturities, S&P said.

The rating on the proposed notes is equalized with the B issuer rating on Medco, the agency said.

This is because all of Medco's cash flow generating assets are located in Indonesia, a jurisdiction considered to have a weak rule of law, lack of creditor-friendly features and lack of consistency in the conformity of the distribution of proceeds to legal rankings of claims, S&P said.

Recovery prospects in the event of bankruptcy are uncertain in the country, a result of the weak jurisdictional context, the agency said.

The ratings reflect the company's modest oil and gas production and reserve scale, concentrated cash flows from a few fields in Indonesia and elevated investment appetite despite high leverage, S&P said.

Tempering these weaknesses are Medco's growing cash flows as new fields ramp up, the company's sound control on costs, creditworthy counterparties and good standing in credit markets, the agency said.

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