An Indonesian marine services provider to the country's offshore oil and gas industry has obtained a standby letter of credit (L/C) to back its newly completed US$37 million bond issue.

The issue listed on the Singapore Stock Exchange continues the trend for Asian firms to use standby L/Cs to obtain offshore financing.

AA- rating

United Overseas Bank (UOB) provided a Singapore-dollar-denominated irrevocable and unconditional standby L/C for Logindo Samudramakmur's issue.

As a result, Standard & Poor's (S&P) Ratings Services assigned its AA- long-term issue rating to the bonds.

S&P view

Despite concerns over the security of L/Cs used in bonds of this kind, S&P appears confident in the fund raising model.

Its view is that the standby L/C is "irrevocable, unconditional, and provides timely and sufficient coverage for the bonds' principal and interest repayment obligations in Singapore dollar, and therefore qualifies for rating substitution treatment."

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.