Research Update: PT Japfa Outlook Revised To Negative On Substantial Distribution Proposed By Parent; 'BB-' Ratings Affirmed

We believe PT Japfa Comfeed Indonesia Tbk.'s credit quality will weaken upon the completion of a proposed distribution in specie by its Singapore-based parent, Japfa Ltd. (Japfa). Japfa has proposed to distribute the entire shareholding of its dairy business to its shareholders. PT Japfa's creditworthiness is linked to that of its parent and benefits from a one-notch uplift from its 'b+' stand-alone credit profile (SACP). Japfa's credit quality will likely converge with PT Japfa post transaction, given the latter will account for 80%-90% of Japfa's consolidated EBITDA in 2023. On April 5, 2022, S&P Global Ratings revised its outlook on PT Japfa to negative from stable. At the same time, we affirmed our 'BB-' long-term issuer credit and issue ratings

...- We believe PT Japfa Comfeed Indonesia Tbk.'s credit quality will weaken upon the completion of a proposed distribution in specie by its Singapore-based parent, Japfa Ltd. (Japfa). Japfa has proposed to distribute the entire shareholding of its dairy business to its shareholders. - PT Japfa's creditworthiness is linked to that of its parent and benefits from a one-notch uplift from its 'b+' stand-alone credit profile (SACP). Japfa's credit quality will likely converge with PT Japfa post transaction, given the latter will account for 80%-90% of Japfa's consolidated EBITDA in 2023. - On April 5, 2022, S&P Global Ratings revised its outlook on PT Japfa to negative from stable. At the same time, we affirmed our '##-' long-term issuer credit and issue ratings on the company. - The negative outlook reflects the likelihood of a downgrade upon the completion of the proposed distribution by Japfa, which will weaken its credit quality. As a result, PT Japfa's SACP will no longer benefit from the...

Research Update