Moody's downgrades Gajah Tunggal

ERJ staff report (DS)

Singapore -- Standard & Poor's Ratings Services

has placed its 'B' long-term corporate credit rating on

Indonesia-based tyre manufacturer PT Gajah Tunggal Tbk. on CreditWatch with

negative implications. The Agency also placed its 'B' issue rating on the company's

senior secured notes on CreditWatch with negative implications.

The Agency said th emove reflects 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.

On June 30, 2011, Gajah Tunggal paid Indonesian rupiah (IDR) 41.8

billion in dividends out of its 2010 profits. The company made the payment

before July 21, 2011, the date on which the interest rate on the restructured

bonds will increase to 6% from 5%.

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Press release from Standard & Poor's