Moody's Investor Services has review textile producer, PT Sri Rejeki Isman Tbk (IDX: SRTX) rating and withdraw PT Barito Pacific Tbk (IDX: BRPT) also PT Jasa Marga Tbk (IDX: JSMR) ratings - Photo: Special

JAKARTA (TheInsiderStories) – Moody’s Investor Services has review textile producer, PT Sri Rejeki Isman Tbk (IDX: SRTX) also known Sritex rating and withdraw PT Barito Pacific Tbk (IDX: BRPT) also PT Jasa Marga Tbk (IDX: JSMR) ratings. Based on the latest report, the agency has placed Sritex ratings under review for downgrade included the company’ B1 corporate family rating.

The review also on the US$150 million senior unsecured notes due in 2024, issued by Golden Legacy Pte. Ltd. and unconditionally, irrevocably guaranteed by the issuer and its subsidiaries, and  the $225 million senior unsecured notes due in 2025, issued by Sritex and unconditionally and irrevocably guaranteed by all its operating subsidiaries. The outlook has been changed to ratings under review from negative.

“The review reflects increased concerns regarding Sritex‘ ability to refinance its $350 million syndicated loan due January 2022 given its weak liquidity position. While we understand that Sritex has made progress in its refinancing efforts, we see a high risk that the company’ funding access will continue to narrow amid a challenging funding environment,” says Stephanie Cheong, a Moody’s Analyst in the report.

She continued, the ratings review will focus on the outcome of the company discussions with its lenders to extend the maturity date on its syndicated loan, its access to funding and the presence of a concrete refinancing plan for any funding shortfall. Moody’s expects to conclude the review as soon as there is increased visibility on these factors.

On Nov. 2, 2020, Sritex submitted a request to its lenders for a two-year extension on its $350 million syndicated loan maturing January 2022. Its lenders had until 1 March 2021, an extension from its first deadline of Feb. 2, to respond to the extension request. Concurrently, the company has been negotiating refinancing arrangements with existing lenders to address any potential funding gap; however, firm agreements are yet to be put in place.

The manufacturer’ liquidity is weak and is estimated the cash holdings of $159 million as of thirt quarter of 2020 and expected free cash flow generation of around $50 million over the next 15 months will not be sufficient to cover its upcoming debt obligations of $65 million medium-term notes, of which $40 million has been paid in the fourth quarter (4Q) of 2020 and $25 million will come due in 2Q 2021.

In addition, a $15 million of debt amortization payments and the unextended portion of its syndicated loan due January 2022. Moody’s free cash flow projections depend on Sritex‘ ability to sustainably free up working capital, which is not clear at this stage. And its revenue prospects remain stable, working capital management is key to improving the company’ cash flow generation and reducing its reliance on short-term working capital facilities, which would otherwise further stretch the company’s liquidity.

As of  3Q of 2020, the producer had $174 million outstanding under short-term working capital lines  will due through 2021 and has a track record of rolling over these working capital lines, the company’ continued reliance on banks for short-term refinancing is a rising risk given tightened funding conditions and overall negative sentiment on the textile sector in Indonesia.

Given today’ rating action, an upgrade is unlikely in the short term. However, the ratings could be confirmed if Sritex successfully addresses its upcoming maturities and materially improves its liquidity and debt structure. On the other hand, the ratings are likely to be downgraded by at least one notch if Sritex fails to put in place a concrete refinancing plan in the near term or if Sritex’ liquidity deteriorates further, either because of falling cash balances, a loss in access to working capital lines, or if working capital fails to unwind over the next few quarters.

Sritex based i 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 $1.2 billion in 2019.

Moody’s has decided to withdraw the rating of Barito Pacific‘ B1 corporate family rating for its own business reasons. The conglomeration firm was established in 1979 as an integrated timber company in South Kalimantan and has developed into an investment holding company with two key assets a 46.63 percent stake in the largest petrochemical producer, PT Chandra Asri Petrochemical Tbk (IDX: CAPC) and a 66.67 percent stake in geothermal independent power producer, PT Star Energy.

The agency also withdrawn Jasa Marga’ Baa3 rating, and the negative outlook on the rating. Moody’s has decided to withdraw the rating for its own business reasons. the state construction firm is currently 70 percent owned by the Indonesian government. As of September 2020, the company operated 1,191 kilometers (km) of toll roads across various parts of Indonesia, or 52 percent of all toll roads by length in operation.

In terms of total toll road concessions, it has the right to build, own and operate around 1,527 km of toll roads in total. The Indonesian Toll Road Authority is the regulator for the industry and the concession counter-party for Jasa Marga.

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