JAKARTA (TheInsiderStories) – Indonesian developer, PT Alam Sutera Realty Tbk (IDX: ASRI) set the price of global bond issuances with total amount of US$485 million a maximum interests around 13 percent per annum. These bonds have two series with tenure three and five years.
Based on the company’ prospectus released on Monday (08/24), the issuer will hold an extraordinary shareholders meeting on Wednesday to get an approval on the corporate action. The management said, all the proceeds will be used to pay off the bonds will mature in 2021 and 2022, including interest and fees.
The company has issued global bonds through its subsidiary’ Alam Synergy Pte. Ltd., worth of $115 million with an interest rate of 11.5 percent, which will mature on April 22, 2021. While, for the 2022 notes are global bonds of $370 million with an interest rate of 6.625 percent and will mature on April 24, 2022.
Recently, Fitch Ratings has lowered the issuer’ rating to CCC- from earlier B- and also downgraded the bonds issued by Alam Synergy. The downgrading of the company is due to the liquidity risk faced by the company to refinance its subsidiary’ debt securities.
Another consideration is the increased risk of payment options, one of which is through bank loans or selling assets in the midst of a pandemic which has an impact on the economic downturn and disruption in the capital and credit markets. The agency also believes that the issuance of global bonds carries a high risk for Alam Sutera.
The developer reported attributable pre-sales fell 21 percent in annual basis to Rp1 trillion ($68.49 million) in first half (1H) of 2020. Its believe the developer’ pre-sales and cash collections will remain muted in the next six to 12 months and therefore Fitch do not expect the company to have sufficient operating cash flows to meet the April 2021 bond maturity.
Fitch believes Alam Sutera’ access to capital markets and banks has tightened meaningfully amid the economic and financial turmoil. Volatility in the Indonesian rupiah has been significant in the year to date and investors in both offshore and onshore capital markets have become more selective.
Fitch also believes the domestic banks are likely to focus on preserving liquidity and prioritising higher-quality borrowers from less-cyclical sectors amid the current environment. The agency do not expect ASRI to be able to complete meaningful bulk land sales to China Fortune Development Co,. Ltd. (CFLD, BB-/Stable) in 2H 2020, which should lead to weaker cash flow from operations this year.
Alam Sutera‘ cash flows have historically benefitted from its partnership with CFLD, as it has sold around Rp1 trillion in land bank on average annually to CFLD in 2016-2019 in and around its Suvarna Sutera township in Pasar Kemis outside Jakarta. These sales helped to make up for slower pre-sales at the issuer’ other projects.
The company sold Rp200 billion in land to CFLD in 1H 2020 for Rp927 billion) and has collected the full proceeds as of today.
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