The credit outlook for Indonesian coal producer Bayan Resources has changed from ‘stable’ to ‘negative’.
The company, which is connected to Low Tuck Kwong, declared force majeure on its supply obligations on September 14, citing delays in approval to increase its production quota.
The key issue is not the credit rating itself, but the uncertainty over approval to increase annual production.
3-Line Summary
1. Bayan’s rating outlook has turned negative
2. Delays in production quota approval are behind the change
3. The Ba1 rating itself has been maintained
On September 18, only the outlook changed from ‘stable’
On September 18, Moody’s Ratings maintained Bayan Resources’ corporate family rating (CFR) at Ba1 while changing the rating outlook from ‘stable’ to ‘negative’. The CFR is a credit rating that assesses a company’s ability to repay its debt. This adjustment does not mean that the rating was immediately downgraded. It is closer to a signal that Moody’s views future credit conditions more cautiously.
Moody’s assessed that Bayan is one of Indonesia’s major thermal coal producers and has a long mine reserve life, a low-cost structure, strong profitability, and good liquidity. The fact that the company has no debt on its financial statements was also cited as a factor supporting its credit metrics.
However, the larger variable in this assessment is not the financial structure but the production approval process. Moody’s explained that regulatory uncertainty related to annual production quota allocations could weigh on production and earnings.
If the quota does not increase, production will be around 39Mt
According to CNBC Indonesia, Bayan declared force majeure on its coal supply obligations on September 14 after approval by the Indonesian government of an amendment to increase its annual mine production quota was delayed. The issue is directly connected to whether the company can reliably produce and deliver its planned volumes.
Moody’s determined that if the revised quota is not granted, production in 2026 could fall from approximately 6,800 million tonnes in 2025 to approximately 3,900 million tonnes (6800, 3900). Even if production increases, Moody’s assessment is that uncertainty in the approval process each year would make it difficult for the company to formulate plans to increase production toward its full production capacity of approximately 8,000 million tonnes (8000).
This uncertainty could also constrain the company’s ability to fulfill contracted supply commitments and increase profit and cash flow. The reason the credit rating agency assigned a ‘negative’ outlook is the possibility that approval delays could limit actual production, rather than short-term movements in coal prices.
EBITDA forecasts also depend on whether approval is granted
Moody’s estimated that if the application to revise the quota is not approved, Bayan’s EBITDA in 2026 could decline from approximately $11 billion in 2025 to approximately $7 billion. EBITDA is a metric used to gauge profit earned from operations before interest, taxes, depreciation, and amortization.
It also presented a forecast that EBITDA could fall further to approximately $4 billion–$5 billion under the assumption that production remains at approximately 3,900 million tonnes in 2027. This is a scenario based on Moody’s assumptions and is not a confirmed figure for actual results.
Conversely, Moody’s expects the company to primarily finance investments in production capacity and infrastructure with internal cash flow, reducing the need for additional borrowing. It also expects the adjusted debt-to-EBITDA ratio to remain below 0.5x over the next two years. When assessing this issue, it is necessary to consider not only whether the Ba1 rating is maintained but also how long delays in production quota approval continue.
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