Fitch downgrades Jababeka

Fitch Ratings said it downgraded Kawasan Industri Jababeka Tbk.'s (KIJA) issuer default rating to C from CC following the company's Tuesday announcement offering to exchange most of its senior unsecured notes due October 2023 for new senior secured notes due 2027. The agency also lowered the senior unsecured $300 million of notes due 2023 to C from CC with an RR4 recovery rating.

The bonds were issued by wholly owned subsidiary, Jababeka International BV, and guaranteed by KIJA. Fitch also downgraded KIJA's national long-term rating to C(idn) from CC(idn).

“The downgrade reflects Fitch's view that the proposed exchange constitutes a distressed debt exchange (DDE), because it results in a material reduction in terms to investors, and we believe the transaction is conducted to avoid a default on the October 2023 notes. Short of completing the exchange offer, KIJA would be left with extremely limited options to repay the notes, due to weak investor sentiment for emerging-market high-yield debt,” Fitch said in a press release.

If KIJA completes the DDE, the agency said it will downgrade the IDR to RD, or restricted default, and re-assess the ratings in line with the post-exchange capital structure. “If the exchange is unsuccessful, KIJA's ratings will be reassessed to reflect the heightened near-term liquidity risks.”

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