JAKARTA (TheInsiderStories) – Textile manufacturer, PT Sri Rejeki Isman Tbk (IDX: SRIL) also known Sritex reported only 60 percent of their lender has agreed to extend the tenor of a syndicated loan with total amount of US$350 million which will mature in January 2022. Initially, the issuer targeting the signing of the extension on March 19.
“Due to an unprecedented incident, the mandated lead arranger and book-runner decided to postpone the signing, causing uncertainty for the company and its lenders,” said the management in an public announcement on Monday (03/22).
Since November of 2020, Sritex has requested an extension of the loans from 2022 to January 2024. Then, the deadline has been extended from Feb. 2 to March 1. The company get the syndicated loan facilities from Citibank, DBS, and HSBC.
Due to unclear debt restructuring, Moody’s Investors Service has downgraded Sritex corporate family rating and the $150 million backed senior unsecured notes issued by Golden Legacy Pte., Ltd., due in 2024 to B3 from B1. The new rating also pinned on the $225 million senior unsecured notes due in 2025 issued by the producer. All ratings remain under review for further downgrade.
“The downgrade reflects Sritex‘ persistently weak liquidity and heightened refinancing risks given ongoing and material further delays with its loan extension exercise,” says Stephanie Cheong, an analyst from Moody’s in the latest report.
The review for further downgrade reflects continued uncertainties relating to its refinancing plans. The ratings review will focus on the progress on addressing its upcoming debt maturities. More specifically, the review will focus on the progress of the discussions with its lenders to extend the maturity date on its syndicated loan.
Then, the progress of Sritex discussions with lenders on new bilateral loans, the ability to renew its short-term working capital lines that will expire through 2021, its working capital management and ability to generate cash flows, and the execution of any alternative funding plans. The agency expects to conclude the review within 60 days.
The company faces high refinancing risk given its weak liquidity position and large amounts of debt maturing over the coming quarters. The manufacturer continued reliance on banks for its refinancing needs leaves it vulnerable to funding conditions, which have weakened amid negative sentiment on the textile sector in Indonesia.
On Nov. 2, 2020, Sritex submitted a request to its lenders for a two-year extension on its $350 million syndicated loan. However, a definitive agreement for the 2-year extension has yet to appear, which increasingly weighs on its credit profile. Concurrently, the company has been negotiating refinancing arrangements with existing lenders to address any potential funding gap. The firm agreements are yet to be put in place until now.
The textile firm’ cash holdings of $159 million as of Sept. 30, 2020 and expected free cash flow of around $50 million over the next 15 months and will not be sufficient to cover its upcoming debt obligations of $350 million syndicated loan due January 2022. Then, $65 million medium-term notes, of which $40 million has been paid in the fourth quarter of 2020, $25 million will be due in 2Q 2021, $15 million of debt amortization payments, and $174 million outstanding under short-term working capital lines as of 3Q of 2020.
Sritex is a vertically integrated manufacturer of yarn, greige (raw fabric), finished fabric and apparel, including uniforms and retail clothing. The company’ operations are spread across 25 factories, consisting of nine spinning plants, three weaving plants, five finishing plants and eight garment plants.
The issuer is majority owned by the Lukminto family (60.11 percent) and Iwan Setiawan Lukminto, the son of founder H.M. Lukminto, has been the president director since 2006. The remaining is publicly traded on the Indonesian Stock Exchange.
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