Moody's rates Medco Energi notes B2

Moody's Investors Service said it assigned a B2 rating to the proposed dollar-denominated backed senior unsecured notes to be issued by Medco Oak Tree Pte. Ltd., the wholly owned subsidiary of Medco Energi Internasional Tbk.

The proposed notes will be irrevocably and unconditionally guaranteed by Medco and some of its subsidiaries on completion of the company's acquisition of Ophir Energy plc.

The outlook is positive.

The bond proceeds will be initially kept in an escrow account and will ultimately be used to finance the £408.4 million acquisition of Ophir, repay existing debt and for generate corporate purposes, Moody's said.

The rating reflects the company's modest scale of operations, moderate degree of cash flow visibility from fixed-price natural gas sales and expectations that its credit metrics will continue to improve over the next few quarters, the agency said.

The improvement in Medco's credit metrics will be supported by its sale of non-core assets in line with its de-leveraging plan and the strong operating cash flow generation from Ophir's portfolio once the transaction is complete, Moody's said.

The agency said it expects Medco's post-acquisition adjusted net debt-to-EBITDA will improve to about 3.5x over the next two years, from around 4.2x in 2018, the agency said.

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