JAKARTA (TheInsiderStories) – PT Sri Rejeki Isman Tbk (IDX: SRTX) also known Sritex offered bond US$225 million. Moody’s Investors Service has assigned a Ba3 rating to the proposed senior unsecured notes and unconditionally and irrevocably guaranteed by all its operating subsidiaries of the company.
The rating outlook is stable.
The proposed notes will rank equal to the manufacturer’ existing senior unsecured notes. Sritex will use a portion of the net proceeds to redeem the remaining US$175 million on its $350 million notes due 2021, and the remainder for working capital and other general purposes.
“The refinancing exercise will extend Sritex’ debt maturity profile once completed, with the company’ next major maturity of $350 million coming due only in 2022,” says Stephanie Cheong, a Moody’s Analyst in an official statement released today (10/09).
The issuer’ proposed issuance constitutes a proactive step in managing the company’ upcoming maturities. It follows its refinancing exercise in January 2019, when the company successfully refinanced $175 million of its $350 million 2021 bonds and existing short-term secured working capital facilities using a three-year $350 million unsecured syndicated loan facility, composed of an up to $200 million term loan facility and a $150 million revolving loan facility, which has an option to extend the maturity by two years, subject to lenders’ consent.
Sritex‘ operating results for the 12 months ended June 30, 2019 were in line with Moody’s expectations, reflecting solid earnings growth and margin stability. However, cash flow generation remained tempered by working capital fluctuations, given the seasonality of the company’ garment business and the size and delivery timeline of customer orders.
Sritex’ Ba3 corporate family rating remains supported by the company’ track record of high organic growth, its diversification across customers, products and geographies, as well as its relatively stable leverage profile, with debt/EBITDA expected to remain between 3.5x and 4.0x over the next 12-18 months.
The CFR also incorporates Sritex’s exposure to related-party transactions, which Moody’s expect will increase over the next 12 – 18 months following the ramp-up of PT Rayon Utama Makmur, an affiliate company that manufactures rayon.
The stable outlook reflects Moody’s expectations that Sritex will maintain its solid operating performance on the back of strong demand from both domestic and international customers. Moody’s expects working capital and capital investments to remain moderate over the next 12 months, which will in turn support positive free cash flow.
The ratings could be upgraded if Sritex maintains its growth trajectory while funding capital expenditure and working capital with internally generated cash flows and lowering debt.
Sri Rejeki Isman based in Central Java, 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. Net revenue generated by the company’s four divisions amounted to around $1.1 billion for the 12 months ended 30 June 2019.
Sritex is majority owned by the Lukminto family (60.11 percent). Iwan Setiawan Lukminto, son of the founder H.M Lukminto, has been the president director since 2006. The family has day-to-day control of operations.
The remaining 39.89 percent share of the company is publicly traded on the Indonesian Stock Exchange.
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