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S&P puts Gajah Tunggal on developing watch
S&P said it placed the CCC long-term corporate credit rating on PT Gajah Tunggal Tbk. on CreditWatch with developing implications.
The agency also said it placed the CCC rating on Gajah Tunggal's outstanding senior secured debt and axCCC Asean regional scale rating on the company on CreditWatch with developing implications.
S&P also said it assigned a B- rating to Gajah Tunggal's proposed issuance of dollar-denominated senior secured notes due 2022.
The agency said it placed the ratings on CreditWatch with developing implications because Gajah Tunggal's proposed bond transaction, if successful, will reduce the refinancing risk on its bonds due February 2018.
Conversely, refinancing risk will increase further if the transaction does not proceed as planned or is delayed, S&P explained.
The company's CCC corporate credit rating currently reflects the high refinancing risk associated with $500 million in dollar-denominated notes due early next year, the agency added.
The company secured $250 million in a committed syndicated bank loan a few days ago. However, that bank loan is conditional upon raising additional bonds to refinance the existing notes, S&P noted.
Gajah Tunggal concomitantly announced a debt capital market transaction for these bonds.
A successful bond issuance over the next four weeks will reduce refinancing risk because Gajah Tunggal will be able to lengthen its debt maturities to an average of about four years, S&P said.
The company's credit profile is expected to remain constrained by the company's modest size as a regional tire manufacturer, margin sensitivity to raw material prices and relatively thin cash flow adequacy ratios and liquidity, the agency said.
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