Fitch assigns Sritex notes BB-

Fitch Ratings said it assigned Sri Rejeki Isman Tbk.'s (Sritex, BB-/stable) proposed dollar-denominated senior unsecured notes an expected rating of BB-(EXP).

The notes will be issued by Sritex's wholly owned subsidiary, Golden Legacy Pte. Ltd., and guaranteed by Sritex and its major subsidiary PT Sinar Pantja Djaja.

The notes are rated at the same level as Sritex's senior unsecured rating as they represent the company's unconditional, unsecured and unsubordinated obligations. The note guarantors together generate or control 100% of Sritex group's operating cash flows.

At the end of 2016, Sritex's secured debt constituted 0.8 times EBITDA, which is well below 2 times to 2.5 times EBITDA, a level that would indicate that unsecured debt is materially impaired due to the presence of prior-ranking debt, and therefore may be rated lower than the long-term issuer default rating, Fitch explained.

The company expects to use up to $90 million of the net proceeds of the proposed dollar-denominated bond to buy back its 2019 senior unsecured bond, and apply any balance to meet near-term maturities and retire bank borrowings, the agency explained. The issue will lengthen the company's debt maturity profile and provide Sritex with significant cash-flow flexibility to execute its medium-term plans.

The earliest significant debt maturity will then be the $350 million 8¼% senior unsecured bond due in 2021.

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