JAKARTA (TheInsiderStories) – Duniatex Group, Semarang-based textile company, asked Singapore bourse to temporarily suspend its US$300 million bond trade, said the management yesterday (09/12). The reasoned, its unit PT Delta Merlin Dunia Textile (DMDT) is being submitted to undergo the Debt Obligation Delay case by its creditor.
PT Shine Golden Bridge has submitted the bankcruptcy case to Semarang court, in Central Java. PThe subsidiary issued senior unsecured bonds with a value of US$300 million which will mature in 2024 with an interest of 8.62 percent. In the third quarter of 2019, the company had an obligation to pay interest on bonds and bank loans of around Rp450 billion or $21.28 million, but did not afford to pay these obligations.
In July, Fitch Ratings has lowered the credit rating of DMDT by six steps in less than 10 days amid concern over the company’ liquidity to ‘CCC-‘ from ‘B-‘, after lowering the rating to ‘B-’ from ‘BB’ on July 18. The downgrade by six notches comes as the trade war between China and the United States has seriously hurt the company’ business.
Fitch said that the downgrade reflected DMDT’ heightened liquidity risk, in particular with regard to the company’ ability to make the scheduled principal amortization and interest payments in September 2019. DMDT had around Rp700 billion in cash as of March 30, Fitch estimates.
The rating agency believed the funds would no longer be available to meet DMDT’ interest and scheduled principal amortization payments. Fitch also said it believed DMDT’ banking and capital market access could be restricted due to an affiliate’ financial distress, taking into account the common ownership and the company’ integrated operations within Duniatex Group.
Fitch Rating in its analysis has estimated the potential for default on DMDT because it saw the risk of DMDT liquidity increasing. This is particularly in the company’s ability to amortize principal and interest payments in September 2019.
Earlier, Standard and Poors (S&P) cut the company’ credit score on DMDT’ dollar bonds by six steps to CCC, citing “significant liquidity challenges”. It said, DMDT’ liquidity was affected by plummeting prices due to the oversupply of imported cheap fabric from China.
Another Duniatex’ subsidiary, PT Delta Dunia Sandang Tekstil (DDST) had also failed to pay interest and principal debt to a number of creditors with a total value of $11 million. S&P Global Ratings also decided to cut the company’ debt rating by 6 levels.
Currently, Duniatex has total assets of around Rp37.85 trillion from six companies that make it the largest textile company compared to other textile companies, such as PT Sri Rejeki Isman Tbk (IDX:SRIL), PT Pan Brothers Tbk (IDX:PRBX) and PT Indo-Rama Syntetics Tbk (IDX:INDR). The assets of the three other textile companies are US$1.36 billion, US$805 million and US$579 million, respectively.
The Duniatex case began when Duniatex’ subsidiary, DDST, failed to pay interest of $13.4 million on July 10, 2019 for a syndicated loan of $260 million. In total, as of March 2019, six units of the Group have total debts of Rp18.79 trillion.
In details, DDST have debt Rp2.92 trillion, DMDT worth of Rp5.71 trillion, PT Delta Dunia Textile Rp4.67 trillion, PT Delta Merlin Sandang Textile Rp3.26 trillion, PT Dunia Setia Sandang Asli Textile Rp2.12 trillion, and PT Damaitex worth of Rp97 billion.
The loans came from 20 banks, that provided bilateral loans, three syndicated loans, and bond debt. Three state-owned banks, and several other large banks were involved as Duniatex creditors.
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