SOVEREIGN DEBT RESTRUCTURING | MASTERCLASS

A deep dive masterclass on sovereign debt restructuring, to be conducted virtually by Asian high yield bond expert Florian Schmidt.

30 June 2022 (Thu), 5pm Singapore/HK time

Moody’s downgraded Sri Rejeki Isman (Sritex)‘s corporate family rating to B3 from B1. The rating agency also downgraded to B3 its $150mn bonds due 2024, issued by Golden Legacy Pte. Ltd. and $225mn bonds due 2025 issued by Sritex and said that the ratings remain on review for further downgrade. The rating action comes after they placed Sritex on review for a downgrade last week. The downgrade to B3 was on account of persistently weak liquidity and increased refinancing risk that come on the back of delays with its loan extension progress.

Sritex has $350mn of a syndicated loan due January 2022, $25mn in medium term notes payable in 2Q2021, $15mn in debt amortization payments and $174mn outstanding under short-term working capital lines as of September 30, 2020 as per Moody’s. With this backdrop, they note that Sritex has cash holdings of $159mn as of September 30, 2020 and expected free cash flows of around $50mn over the next 1.25 years – this will not be sufficient to cover their expected payments stated earlier. Sritex’s proposed request for a two year extension on its $350mn syndicated loan due January 2022 has not been reached even after the deadline of March 1 weighing on their credit profile.

Sritex’s 6.875% 2024s issued by Golden Legacy Pte. Ltd and its 7.25% 2025s were down 0.4 cents and 1 cent to trade at 75.1 and 74.6 cents on the dollar, yielding 17.9% and 16.5% respectively on the secondary markets.

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