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Rating Action:

Moody's assign B1 ratings to Bhakti Investama

Global Credit Research - 03 May 2013

Hong Kong, May 03, 2013 -- Moody's Investors Service today assigned a corporate family rating (CFR) of B1 to PT Bhakti Investama Tbk. ("BHIT"). The outlook for the rating is stable.

This is the first time Moody's has assigned a rating to BHIT.

At the same time, Moody's has also assigned a provisional (P)B2 rating with a stable outlook to the proposed USD senior secured notes to be issued by BHIT's wholly owned subsidiary, Ottawa Holdings Pte. Ltd.

Proceeds from the bond will ultimately be used to fund BHIT's up to 26.6% stake in MNC Land, valued at around US$200 million. Proceeds will also be used for the initial funding of a debt service account and for general corporate purposes.

The notes will be guaranteed by BHIT.

Moody's will remove the provisional rating status of the senior secured notes upon completion of the issuance and satisfactory review of the final documentation.

RATINGS RATIONALE

"BHIT's B1 rating recognizes the company's defensible market position and solid cash flow generated by its core media business, which has a long established record in content and advertising and its expanding pay TV business, together which contributed over 95% to BHIT's consolidated operating profit in 2012" says Annalisa Di Chiara, a Vice President -- Senior Analyst at Moody's.

The media assets relate to BHIT's 51.55% stake in PT Global Mediacom Tbk ("Mediacom) which in turn owns a 69.47% stake in PT Media Nusantara Citra Tbk ("MNC", Ba3 Stable), the leading free-to-air (FTA) provider in Indonesia, and a 66.47% stake in PT MNC Sky Vision Tbk ("Sky Vision", B2 Positive), the leading pay TV operator in Indonesia. BHIT also has a direct 9.6% interest in Sky Vision.

Effectively, BHIT's current direct and indirect ownerships in MNC and SkyVision are 35.8% and 43.8%, respectively.

"This market leading media business is expected to provide stable cash flows and a stream of cash dividends, which will ultimately support the debt servicing capabilities of BHIT. As a result, the current operating performance and credit profile of the media business provides an anchor for the BHIT's rating", adds Di Chiara.

As an investment holding company, BHIT's investment strategy is geared towards high growth, high return businesses. As a result, management envisions the non-media related businesses contributing around 25-30% of consolidated revenues by 2015 as these grow and develop, reducing the contribution from the media businesses to around 65%-70%.

Therefore, Moody's assessment of BHIT's credit profile also considers the credit quality and risk factors associated with the Group's other strategic assets and portfolio investments outside of the core media business. These include: 1) a 89.77% interest in PT MNC Kapital Tbk. ("Kaptial"), a financial services provider; 2) a 99.9% interest in PT MNC Energi Tbk ("Energi"), an energy & natural resources company; and 3) a potential 26.6% interest in MNC Land, a real estate business with significant proposed developments in the pipeline.

The investment in MNC Land is to be funded by a substantial portion of the proceeds of the proposed bond.

"In our view, the non--media related businesses in the Group, separately and collectively, have weaker market positions, lower margins and higher associated cash flow volatility which translate into higher business and financial risks.

These businesses will also require inorganic growth and investments in order to achieve the scale and market position management targets which also heighten event and execution risks, particularly given the limited track record of success in these businesses, " adds Di Chiara.

Moody's financial analysis of BHIT considers the consolidated audited financial reports, which consolidate all major group companies. At the same time, we analyze the holding company's cash flows against its debt-servicing capability.

Moody's expects coverage of interest from cash dividends at the holding company level, BHIT, to remain above 1.5x.

All of these factors, in combination, support a rating for the group of B1 with a stable outlook.

The (P)B2 rating on the proposed USD senior secured notes reflects the complex organizational and legal structure and thus factors in structural subordination. As a holding company, BHIT is entirely reliant on dividends. The claims of BHIT's creditors on the assets and cash flows of BHIT's operating units are subordinate to those of the direct creditors of the operating units, as the majority of the group's debt is incurred at the operating unit level with dividends being up streamed from key operating assets with which to service its obligations.

The stable outlook reflects our expectations that BHIT will maintain its 51% stake in Mediacom and coverage of interest from cash dividends at the holding company level, BHIT, will remain above 1.5x.

Ratings upside is limited at this stage, given the limited track record of success and higher business risks associated with BHIT's non-media related businesses. Longer term upside may materialize, once the growing non-media businesses develop a size and market position that allows them to contribute materially and predictably to debt servicing at BHIT.

On the other hand, negative rating pressure could evolve if the operating risk profile of its media businesses increased significantly, resulting in more volatile cash flows, which might be motivated by (1) a material downturn in advertising spend; (2) MNC or Sky Vision losing their dominant positions in the Indonesian FTA television market and Pay TV market, respectively; (3) laws and regulations change, such that its business in media, financial services or energy is adversely impacted; and (4) the company embarks on aggressive debt-funded acquisitions.

The principal methodology used in these ratings was Global Investment Holding Companies Methodology published in October 2007. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

The first name below is the lead rating analyst for this Credit Rating and the last name below is the person primarily responsible for approving this Credit Rating.

Annalisa Di Chiara
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Philipp L. Lotter
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Moody's assign B1 ratings to Bhakti Investama
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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