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05 June 2020 (closed)
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After already having warned in April 2013 that Indonesian telecommunications operator Bakrie Telecom is likely to default on its debt and is in need to restructure its USD $380 million senior unsecured bonds due in May 2015, Fitch Ratings downgraded the company's long term foreign- and local currency issuer default rating to Restricted Default (RD) from C (highly vulnerable) on Friday (30/05). Bakrie Telecom (BTEL) is a subsidiary of the controversial and politically-linked Bakrie & Brothers holding company.
The USD $380 million May 2015 bond (guaranteed by Bakrie Telecom) was affirmed at C while the recovery rating on the bond has been downgraded to RR5 from RR4.
Fitch Ratings stated that the downgrade to RD follows the uncured default on a coupon payment in November 2013 and no subsequent coupon payment or public announcement about the progress of debt restructuring discussions with its creditors.
Fitch believes that a distressed debt exchange (DDE) is inevitable, which is likely to lead to a significant loss for holders of the USD $380 million bond, which is currently trading at 11 cents to the dollar, indicating high probability of a material reduction in economic value.
The rating agency said that a lower recovery rating of RR5 on the bond reflected a decline in the enterprise value of the business as 2014 EBITDA would probably fall to between IDR 600 billion (USD $52.2 million) and IDR 700 billion (USD $60.9 million) from IDR 911 billion in 2013.
Bakrie Telecom provides fixed digital radio cellular telecommunication network and services. Its operational areas are located in more than 80 cities across West Java, Central Java, East Java, Bali, Sumatra, Sulawesi and Kalimantan. The company had around 12 million subscribers at the start of 2014.
Stock Quote Bakrie Telecom: