PT Modernland Realty Tbk (IDX: MDLN), has proposed to postpone the interest payment of its two global bonds with a total value of US$390 million until May 31, 2021 - Photo by the Company

JAKARTA (TheInsiderStories) –  The developer of Jakarta Garden City, PT Modernland Realty Tbk (IDX: MDLN), has proposed to postpone the interest payment of its two global bonds with a total value of US$390 million until May 31, 2021. The reasoned, the issuer is still looking the ways to restructure the notes, which have been negotiating since last year.

President Director of the real estate firm, William Honoris in a written statement, said the hearing of the company and its subsidiaries, JGC Ventures, Modernland Overseas, and MDLN Holdings Pte. Ltd., requested will be hold at the Singapore Court on March 1. Since July 2020, the company has appointed Borrelli Walsh and Milbank LLP to assisted the debt restructuring process.

Modernland has asked the first moratorium on July, September, and then in October 2020. The $150 million senior notes have a coupon rate of 10.75 percent and will mature on August 30, 2021. While, the $240 million of senior notes has a coupon rate of 6.95 percent and will mature on April 13, 2024.

Since last year, the management stated that the COVID-19 has affected the company and its subsidiaries’ businesses, making it difficult for the company to pay the interests. This default made Fitch Ratings cut Modernland’ rating to restricted default from previously C in October 2020.

The downgrade follow the expiry of the 30-days grace period following the non-payment of the coupon on the group’ $150 million senior unsecured notes due 2021, which are issued by JGC Ventures. The cross-acceleration clause of the $240 million 2024 notes has also been triggered by the non-payment of the 2021 notes.

The ‘RD’ rating indicates an issuer that in Fitch’s opinion has experienced an uncured payment default, but has not entered into bankruptcy filings and has not ceased operating. At the same time, Fitch has affirmed the ratings on $150 million notes due 2021 and $240 million notes due 2024 issued by its wholly owned subsidiaries, JGC Ventures and Modernland Overseas, respectively, at ‘C’ and Recovery Rating of ‘RR4’.

Modernland says its liquidity is under severe pressure, which led to the restructuring of a Rp150 billion ($10.13 million) bond in July 2020. The company claims the pandemic has made it difficult to collect payments from buyers, and it has granted payment deferrals and seen increased cancellations from pre-sales.

Efforts to revive sales may also face challenges due to weak buyer sentiment amid the pandemic. The publicly announced debt restructuring, with its shares and onshore bonds suspended on the Indonesia Stock Exchange, has cast doubt on the business continuity and may impair confidence in the company’ projects.

So far, JGC Ventures has applied for a moratorium and will restructure its debt in the Singapore courts. The company plans to provide bondholders with a restructuring proposal sometime in October. Fitch will reassess the developer’ capital structure and reassign an Rupiah once the restructuring is finalized, concluded the report.

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