July 6, 2011 -- Standard & Poor's Ratings Services said today that it had placed its 'B' long-term corporate credit rating on Indonesia-based tire manufacturer PT Gajah Tunggal Tbk. on CreditWatch with negative implications. We also placed our 'B' issue rating on the company's senior secured notes on CreditWatch with negative implications.
We placed the ratings on Gajah Tunggal on CreditWatch to reflect the risk that the company's liquidity could significantly weaken if its recent dividend payment constitutes a covenant breach under the terms of its 2009 restructured bonds. We believe litigation risks from holders of the restructured bonds could arise if the dividend payment constitutes a covenant breach. An accelerated repayment of the principal of the restructured bond would severely impair Gajah Tunggal's liquidity and heighten the risk of default, in our opinion. We may lower the rating on Gajah Tunggal by multiple notches if the dividend distribution constitutes a covenant breach. '+'
