Indonesian tanker firm Berlian Laju to stop debt payments

SINGAPORE/JAKARTA: Indonesia's largest oil-and-gas shipping company PT Berlian Laju Tanker Tbk will stop servicing its debt of around US$2 billion (RM6.08 billion), putting it at risk of a default rating from Fitch.

The company blamed the global economic downturn and weak freight rates on the one hand and higher shipping fuel and other operating costs on the other, highlighting concerns that have already driven other shipping firms to the wall.

These factors "have significantly impacted the company's business and financial position," president director Widihardja Tanudjaja said

in a statement, which added that the company is considering a restructuring of its operations and finances.

Berlian Laju shares were suspended from trading in Singapore and Jakarta, but the announcement sent a subsidiary's stock to a record low and hit customer shares as well.

Berlian Laju's total outstanding debt was US$1.9 billion (RM5.7 billion) as of the company's last financial statement in September. About US$418 million (RM1.2 billion) in scheduled principal payments are due this financial year.

Financial director Kevin Wong insisted the standstill would be temporary and that creditors were supportive.

"Debt standstill is just a temporary solution. We still need to do a lot of work," he said between meetings in Singapore yesterday with creditors.

The Indonesian tanker firm, with a fleet of around 100 vessels, said it hopes to carry on with its normal business while it reviews its financial position and arrangements. It will give the "highest priority" to servicing its obligations to its suppliers and trade creditors, who will not be affected by the debt standstill, the company said.

"The company has decided to temporarily cease repayments on all of the company's bank loans and bonds and payments on ship leases and on similar obligations of its other subsidiaries, save for PT Buana Listya Tama Tbk," Berlian Laju said.

The decision to freeze debt payments follows a covenant breach on a loan granted to a Berlian Laju subsidiary, for which Berlian Laju is a guarantor, the company said.

It didn't identify the subsidiary. Fitch immediately placed Berlian Laju's CCC rating, one grade above a default rating, on watch negative. If coupon payments or principal payments are not made within the contractual period, Fitch will cut the company's rating to RD to indicate the company is in default. Reuters