Standard & Poor’s Ratings Services withdrew on Thursday its ratings on Davomas Abadi, a publicly traded Indonesian cocoa processor, because it no longer had access to the company’s management.
Before S&P withdrew its ratings, Davomas’s long-term corporate credit rating and its senior secured notes maturing in 2014 were cut on Thursday to CC, the fourth-lowest non-investment grade, from CCC+.
“The rating actions followed our inability to confirm whether Davomas paid a $3.561 million coupon on its senior secured notes due March 7, 2012,” S&P said in a statement.
“In our view, it is likely that a payment default has occurred. Without access to management, we no longer have visibility over the company’s intentions toward bond payments or clarity over its current financial position.”
The company has Rp 2.39 trillion ($261 million) in bonds due in 2014 and Rp 36.3 billion in 2049, according to Bloomberg data.
S&P’s actions came after Davomas’s corporate debt was downgraded to Ca, the second-lowest junk rating, from Caa3, by Moody’s Investors Service on Tuesday, and the company’s outlook was placed as negative.
“The rating action follows Moody’s concerns that the weak sales over the past two quarters and poor inventory management could have led to the depletion of cash reserves and impaired the company’s ability to service interest payments,” said Alvin Tan, a Moody’s analyst.
In the nine months ended September, Davomas reported a loss of Rp 122 million. It was also unprofitable from 2008 to 2010.
Although Davomas has yet to announce its full-year results, Moody’s said it expected sales volumes for its cocoa products to decline in the fourth quarter of 2011 and first quarter 2012, due mainly to its high exposure to the weakened European and US markets. The company’s cash reserves could consequently be depleted as it would need to continue servicing fixed operating costs, which could impair its ability to service interest payments, Moody’s said.
Berliana Sukarmadidjaja, Davomas’s president director, did not respond to requests seeking comment.
Shares in Davomas were suspended from the Indonesia Stock Exchange on March 9, having traded at just Rp 50 the previous day. For the year, the stock is unchanged after slumping 32 percent in 2011.