Hong Kong, May 12, 2017 -- Moody's Investors Service has downgraded the corporate family rating
(CFR) of MNC Investama Tbk. (P.T.) (BHIT) to Caa2
from Caa1, and the senior secured rating on the notes, issued
by its wholly-owned subsidiary, Ottawa Holdings Pte.
Ltd., and unconditionally and irrevocably guaranteed by BHIT,
to Caa3 from Caa2.
The outlook on the ratings is negative.
Through its 52.84% stake in PT Global Mediacom Tbk (BMTR
), BHIT has stakes in media operating companies PT Media Nusantara
Citra Tbk (MNCN), Indonesian's leading free-to-air
broadcast company, and PT MNC Sky Vision Tbk, Indonesia's
leading pay-TV operator. BHIT also has a significant interest
in PT MNC Kapital Indonesia Tbk, a leading financial services company
in Indonesia.
RATINGS RATIONALE
"The downgrade of BHIT's CFR rating to Caa2 reflects the significant
and pressing level of refinancing risk throughout the group. As
of 31 March 2017, BHIT's consolidated short-term, current
debt and bonds payable totaled IDR6.3trillion . In addition,
BHIT's $365 million senior secured notes are due in May 2018,"
said Annalisa DiChiara, a Moody's Vice President and Senior Credit
Officer.
Most of the short-term and current debt maturities are at the operating
subsidiary levels, including a $250 million (IDR 3.4
trillion) bank loan maturing at MNCN, and an IDR999 billion bond
payable at BMTR.
In addition, the $365 million 5.875% senior
secured notes -- issued by BHIT's wholly-owned subsidiary
Ottawa Holdings Pte. Ltd. and unconditionally and irrevocably
guaranteed by BHIT-- mature in May 2018. In our view,
the absence of a definitive refinancing plan to secure funding one year
prior to maturity exposes the company to a material level of refinancing
risk and market risk.
The BHIT bond is secured by 3,276,739,031 shares of
BMTR (equal to 2.0 times the principal amount of the notes offered
as of the date of the offering memorandum in May 2013 based on the BHIT's
financial statement disclosure). However, based on a closing
price on 10 May 2017, the value of those shares is currently equal
to just 0.4x of the principal amount of the $365 million
senior secured notes outstanding.
We note that the debt service account -- equal to two semi-annual
interest payments - was fully funded with an amount equal to $10.7
million at 31 March 2017, according to the disclosure in BHIT's
financial statements.
At the same time, the Caa2 CFR reflects BHIT's complex organizational
structure.
BHIT owns less than 100% of its operating subsidiaries, including
MNCN. As a result, Moody's also analyzes BHIT on a standalone
basis whereby the company's EBITDA consists primarily of the cash dividends
it receives from its subsidiaries, based on its effective equity
ownership.
For example, although fully consolidated, as of 31 March,
BHIT's effective interest in MNCN -- which Moody's estimates
contributes a majority of BHIT's consolidated EBITDA --
was only around 33%. This is because BHIT owns around 52.84%
of BMTR, which then owns around 62.66% of MNCN .
Moody's believes this standalone analysis results in significantly higher
leverage and weaker interest coverage than the 4.5x adjusted debt/EBITDA
and 3.2x EBITDA/interest BHIT recorded on a Moody's adjusted consolidated
basis for the 12 months ended 30 Dec 2016.
Finally, although on a consolidated basis, cash and current
financial assets totaled IDR8.2 trillion at 31 March 2017,
a portion of this amount is at operating subsidiaries, including
BMTR and MNCN, which are less than 100% owned. Moody's
is also cognizant that a portion of consolidated cash and financial assets
is either deposited in, or held in financial securities issued by,
related parties, and so may not be immediately realizable.
The outlook is negative, reflecting the persistent level of refinancing
risk present throughout the BHIT group over the next 12-15 months,
including the $365 million senior secured notes maturity in May
2018.
Further negative ratings pressure could emerge should BHIT's operating
subsidiaries fail to service or successfully refinance their maturing
loans or BHIT's bond.
Upward rating pressure is unlikely over the near term, given the
significant level of refinancing risk associated with debt maturing at
BHIT's key operating subsidiaries and its own bond maturity in May
2018.
However, the ratings could be upgraded should BHIT refinance its
upcoming bank and bond maturities in a timely manner and without a significant
increase in interest costs.
The principal methodology used in these ratings was Business and Consumer
Service Industry published in October 2016. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
methodology.
Headquartered in Jakarta, MNC Investama Tbk. (P.T.)
(BHIT) is a listed investment holding company with strategic investments
in operating companies in media, financial services, energy
and real estate. BHIT is controlled by Mr. Hary Tanoesoedibjo.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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
VP - Senior Credit Officer
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
Client Service: 852 3551 3077
Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
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
Client Service: 852 3551 3077
