MARKET DEVELOPMENT
Moody's Affirms IOI Ratings At BAA2, Changes Outlook To Negative
Moody's Affirms IOI Ratings At BAA2, Changes Outlook To Negative
04/09/2015 (Bernama) - Moody's Investors Service (Moody) has affirmed the Baa2 issuer rating of IOI Corporation Bhd (IOI), the Baa2 senior unsecured bond ratings of IOI Investment (L) Bhd and the Baa2 senior unsecured bank credit facility rating of IOI Ventures (L) Bhd.
The (P)Baa2 senior unsecured MTN programme rating of IOI Investment (L) Bhd was also affirmed.
In a statement today, Moody said the outlook on all ratings has changed to negative.
"The change in outlook reflects Moody's expectation of continued pressure on palm oil prices over the coming year due to the ample supply of palm oil and other vegetable oils.
"At the same time, enthusiasm for consuming palm oil in biodiesel and industrial applications is limited in the light of low crude oil prices," it said.
Nevertheless, Moody, said the underlying long-term credit strength of the palm oil plantation sector remains sound as it has the lowest production cost of all vegetable oils.
Based on IOI's latest financial results for the year ended June 30, 2015 (FY2015), credit metrics have weakened further with adjusted debt/EBITDA at 4x and negative retained cash flow.
Moody's vice-president and senior credit officer Alan Greene said IOI's credit metrics were a function of its policy in terms of shareholder distributions and capital structure, therefore, controllable by management.
"While dividends declared reflect past profits, dividend payments and share buybacks are paid from current cash flows and have been consuming well over half of the funds generated from operations, which declined by 37 per cent over the 12 months to 30 June 2015," Greene said.
He said 99 per cent of IOI's borrowings as at June 30, 2015 were denominated in foreign currency, mainly US dollars.
"Although net debt increased in financial year FY2015, IOI has excellent liquidity and further improved its debt maturity profile during FY2015 by refinancing existing long-term debt, finishing the year with short-term debt of only RM812 million from the total debt of RM6.65 billion," he said.
The (P)Baa2 senior unsecured MTN programme rating of IOI Investment (L) Bhd was also affirmed.
In a statement today, Moody said the outlook on all ratings has changed to negative.
"The change in outlook reflects Moody's expectation of continued pressure on palm oil prices over the coming year due to the ample supply of palm oil and other vegetable oils.
"At the same time, enthusiasm for consuming palm oil in biodiesel and industrial applications is limited in the light of low crude oil prices," it said.
Nevertheless, Moody, said the underlying long-term credit strength of the palm oil plantation sector remains sound as it has the lowest production cost of all vegetable oils.
Based on IOI's latest financial results for the year ended June 30, 2015 (FY2015), credit metrics have weakened further with adjusted debt/EBITDA at 4x and negative retained cash flow.
Moody's vice-president and senior credit officer Alan Greene said IOI's credit metrics were a function of its policy in terms of shareholder distributions and capital structure, therefore, controllable by management.
"While dividends declared reflect past profits, dividend payments and share buybacks are paid from current cash flows and have been consuming well over half of the funds generated from operations, which declined by 37 per cent over the 12 months to 30 June 2015," Greene said.
He said 99 per cent of IOI's borrowings as at June 30, 2015 were denominated in foreign currency, mainly US dollars.
"Although net debt increased in financial year FY2015, IOI has excellent liquidity and further improved its debt maturity profile during FY2015 by refinancing existing long-term debt, finishing the year with short-term debt of only RM812 million from the total debt of RM6.65 billion," he said.