Shares of the developer company, PT Modernland Realty Tbk (IDX: MDLN) have been suspended by Indonesia Stock Exchange, said the bourse on Tuesday (07/07) - Photo by Jakarta Garden City

JAKARTA (TheInsiderStories) – Shares of the developer company, PT Modernland Realty Tbk (IDX: MDLN) have been suspended by Indonesia Stock Exchange, said the bourse on Tuesday (07/07). Simultaneously, Moody’s Investors Service also downgraded the corporation rating of the company from Caa1 to Ca with a negative outlook.

Its known that on July 7, 2020, there was an obligation by the issuer to pay its principal debt worth of Rp150 billion (US$10.49 million) with a coupon rate 12.5 percent per annum. Before the suspension of the company share price stood at Rp55 per share.

“We can say that the company postponed the payment of the bond principal due on July 7, 2020, which raises doubts about the continuity of the company’ business,” said the statement through an exchange announcement.

The regulator decided to suspend the trading of stocks and bonds of the developer at all markets starting tomorrow until further announcements.

According to Moody’s, the rating of the bonds was issued by JGC Ventures Pte. Ltd., and Modernland Overseas Pte. Ltd. Both are fully owned by subsidiaries and guaranteed by Modernland Realty.

“The downgrade reflects our expectations of a high possibility of default in the near future, including the potential for debt restructuring, due to a decline in the company’s operating cash flow generation and liquidity,” said Jacintha Poh, VP and senior credit offficer at Moody’s in an official statement.

She added, “The negative outlook reflects uncertainty around the recovery rate for companies combining $390 million of notes in case of default.”

Modernland plans to hold a meeting with bondholders on July 14, 2020 with one of the agenda items being the change in the principal payment date. According to Moody’s, the company had cash outflows of Rp188 billion in the first quarter of 2020.

At the same time, Moody’s has downgraded the backed senior unsecured rating of the 2021 notes issued by JGC Ventures Pte. Ltd. and the 2024 notes issued by Modernland Overseas Pte. Ltd. to Ca from Caa1. Both are wholly owned subsidiaries of Modernland and the notes are guaranteed by the company and most of its subsidiaries.

“The downgrade of Modernland‘ ratings reflects our expectation of a high likelihood of imminent default, including a potential debt restructuring, because of a deterioration in the company’s operating cash flow generation and liquidity,” says Jacintha Poh, a Moody’s VP and senior credit officer.

She continued, “The negative outlook reflects uncertainty around the recovery rate for the company’s combined $390 million of notes in case of default.”

it said, the company will hold a meeting with bondholders on July 14 with one of the agenda items being the change of the bond’ principal repayment date. Modernland recorded cash outflows of Rp188 billion in the first quarter of 2020.

The developer’ cash and cash equivalents also fell to Rp180 billion as of March 31, 2020 from Rp554 billion as of Dec. 31, 2019. Moody’s expects cash flow generation will stay weak in 2020 because coronavirus-led disruptions have resulted in sales cancellations and delays in cash collections.

Unless the Modernland is able to secure external funding, the company will not have sufficient funds to repay its bond due and meet interest payments of around Rp250 billion semi-annually on its US dollar bonds worth of $150 million with coupon 10.75 percent due August 2021 and $240 million have coupon 6.95 percent mature on April 2024.

A missed payment on either obligation, not remediated within its respective cure period, will lead to an event of default under the indentures of its US dollar bonds. Pooh said, Modernland’ ratings could be downgraded further in case of default, including a formal debt restructuring, if Moody’s estimates that expected losses for the company’ creditors will be higher than those implied by the Ca rating.

US$1: Rp14,300

Written by Editorial Staff, Email: theinsiderstories@gmail.com