Precedence: bulk FREEPORT CREDIT RATING LOWERED Indonesian unrest cited Freeport-McMoRan Copper & Gold Inc. took a blow late Wednesday when the debt-rating agency Standard & Poors Corp. lowered the mining, giant's corporate credit rating from B- to CCC+ because of political instability in Indonesia. A bond rating of BBB or higher is considered investment grade, while anything below that is considered more speculative or junk bonds. "'Vulnerable' would a good word" to describe the CCC+ rating," said Shannon Bell, a spokeswoman for Standard & Poor's. The New Orleans-based company has been grappling with political uncertainty in Indonesia, low copper prices and a foundering stock price. Responding to the downgrade, Freeport spokesman Garland Robinette said S&P had removed Freeport from CreditWatch status "and indicated the outlook was stable." S&P places a company in CreditWatch to alert investors that it may change a credit rating. S&P also pointed to Freeport's improved cash flow, which was expected to reduce debt levels going forward, Robinette noted. Rating agencies are independent firms that assess risks associated with a company's bonds and credit and grade the bonds based on those assessments. In a news release, Standard & Poor's said the rating reflected several factors: the company's past close ties with ousted President Suharto and the potential for retribution by political enemies, concern over a "rising tide of populism" in Indonesia and increasing support for autonomy for the province of Irian Jaya, location of Freeport's massive copper and gold mine. Freeport has been buffeted in the past year by weak fundamentals in the gold and copper markets as central banks have sold off large stakes of gold and the Asian financial crisis has led to a decline in demand for copper. Adding to these problems has been a seismic political change in Indonesia. In May 1998, Standard & Poor's lowered Freeport's rating from B to B-, citing "continuing concerns related to Freeport-McMoRan's exposure to heightened political and financial risks of the Republic of Indonesia." That move came as violence triggered by an economic crisis swept Indonesia, leaving at least 500 people dead. The uprisings ultimately led to the resignation of Suharto, a longtime Freeport ally. After Suharto's removal, emboldened critics of the old regime, among them nationalists opposed to foreign investment, stepped up criticisms of Freeport, which is one of-Indonesia's most prominent foreign investors and the first foreign company to invest in Indonesia under Suharto. Standard & Poor's offered some positive comments about the company. "With copper and gold equity production in 1998 of 1.42 billion pounds and 2.2 million ounces, respectively, Freeport is one of the largest and lowest-cost producing gold mines in the world," Standard & Poor's wrote. But the rating agency also said: 'This is offset by Freeport's exposure to Indonesian political risk, volatile commodity prices, and aggressive financial policies." ---------- SiaR WEBSITE: http://apchr.murdoch.edu.au/minihub/siarlist/maillist.html
