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Global Credit Research - 21 Jun 2010
Approximately US$200 million of debt securities affected
Hong Kong, June 21, 2010 -- Moody's Investors Service has confirmed PT Matahari Putra Prima Tbk's
B1 corporate family and senior unsecured bond ratings. The ratings
outlook is stable.
This rating action concludes the rating review which commenced on 27 January
2010 following the company's announcement of its plan to sell off
Matahari Department Store ("MDS").
"The rating confirmation reflects Moody's expectation that
Matahari will improve its credit profile through debt reduction --
IDR 1.9 trillion has already been repaid so far in 2010 --
by applying the proceeds from the disposal of its majority stake in MDS
and internally generated cash flow," says Ken Chan,
a Moody's Vice President and Senior Analyst.
Of this transaction's total value of IDR7.2 trillion,
Matahari will receive IDR5.3 trillion in cash, IDR1.0
trillion receivables to be repaid in 7 years, and a 20% stake
valued at IDR0.9 trillion in Meadow Asia Company, an intermediate
holding company of MDS.
Matahari plans to allocate IDR3.4 trillion for debt repayments,
IDR0.9 trillion for capital expenditures and working capital needs,
and IDR1.0 trillion for dividend payments.
"While the company's credit metrics are expected to improve
-- Adjusted Debt/EBITDA falling to 3.5x from 5.3x
a year ago, and Adjusted Debt/Capitalization declining to 25%
from 76%, the disposal of the more profitable MDS,
which accounted for over 75% of the company's 2009 EBITDA,
constrains its rating at B1," says Chan.
"The loss of MDS revenue will be partially made up by the company's
expanding hypermarket business which has outperformed the competition
and has achieved year-to-date like-for-like
growth rates of mid-to-high single digits" says Chan.
The B1 rating continues to reflect the stable and growing characteristics
of the hypermarket business in Indonesia, the company's operating
track record in outperforming its peers, and its projected sound
credit profile. However, the rating also incorporates the
low profitability of the hypermarket business and the keen level of competition
in the industry.
The stable outlook reflects Moody's expectation that the company
will use the proceeds from the MDS sale to reduce debt, including
the USD200 million bonds, and that it will focus on the organic
growth of its hypermarket business.
Near-term upward rating pressure is limited. But,
the ratings may experience upward pressure over the medium term if the
company 1) demonstrates that it can sustain its competitive position in
the hypermarket; 2) can expand through organic growth instead of
debt-funded acquisitions; and 3) improves its operating efficiency
and profit margins as planned.
Moody's would consider such improvements as being reflected in improved
credit metrics of Adjusted Debt/EBITDA below 2.5-3.0x
and Adjusted EBITDA/Interest above 4.0-4.5x on a
Downward rating pressure may arise if Matahari 1) fails to apply the sale
proceeds to further reduce debt, including the USD200 million bonds;
2) is unable to defend its market share in the hypermarket business;
3) experiences a decline in profit margins, arising from intense
competition in its hypermarket business; and/or 4) expands its business
through aggressive debt-funded acquisitions.
In such a downgrade scenario, the company's credit metrics
could deteriorate with Adjusted Debt/EBITDA above 4.0-4.5x
and Adjusted EBITDA/Interest below 2.0-2.5x on a
The last rating action for Matahari was taken on 27 January 2010,
when Moody's placed its B1 corporate family and senior unsecured
ratings on review for possible downgrade.
The principal methodology used in rating this issuer was the Rating Methodology
-- Global Retail Industry, December 2006, which
can be found at www.moodys.com in the Research & Ratings
directory, in the Rating Methodologies subdirectory.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Research & Ratings
PT Matahari Putra Prima Tbk is a leading retailer in Indonesia with multiple
retail formats. It operates hypermarkets, supermarkets and
family entertainment outlets in over 39 cities in the country.
The Lippo group controls about 57% of Matahari's equity interest.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Philipp L. Lotter
Senior Vice President
Corporate Finance Group
Moody's Singapore Pte Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Moody's confirms Matahari's B1 rating; outlook stable
No Related Data.
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