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Rating Action:

Moody's downgrades MNC Investama's CFR to B2 and senior secured bond rating to B3; outlook negative

17 Dec 2015

Hong Kong, December 17, 2015 -- Moody's Investors Service has downgraded to B2 from B1 the corporate family rating (CFR) of P.T. MNC Investama Tbk. (BHIT) and to B3 from B2 the bond rating of the USD365 million senior secured notes issued by its wholly owned subsidiary Ottawa Holdings Pte. Ltd., and guaranteed by BHIT.

The outlook is negative.

Through its 50.24% stake in Global Mediacom (BMTR), BHIT has a significant stake in media operating companies PT Media Nusantara Citra Tbk (MNC), Indonesian's leading free to air (FTA) broadcast company, and PT MNC Sky Vision Tbk (Sky Vision) Indonesia's leading pay TV operator.

RATINGS RATIONALE

"The rating action reflects the deterioration in BHIT's financial profile, as evidenced by its rising leverage and weaker interest coverage metrics, as well the near-term refinancing risk associated with the US dollar-denominated loan maturing in 2016 at Sky Vision, one of its media operating subsidiaries," says Annalisa Di Chiara, a Moody's Vice President and Senior Credit Officer

Sky Vision has a USD243 million loan maturing in 2016, of which 25% is due in August and the remainder in November for which no firm refinancing plan has yet been announced. As such, this near-term refinancing risk weighs on BHIT's rating.

There are cross default provisions contained in BHIT's bond indenture, in the event Sky Vision -- as a restricted subsidiary -- defaults on an interest or principal payment on any debt outstanding.

"BHIT's financial profile has also deteriorated over the last 12 months reflecting the weakening operating performance at its media operating subsidiaries combined with higher absolute debt levels and higher debt service costs as the rupiah has depreciated against the dollar," adds Di Chiara, also the Lead Analyst for BHIT

BHIT's consolidated leverage, as measured by adjusted debt/EBITDA, has risen to 3.5x, Moody's expects leverage to increase further to 4.5x in 2016 which is more consistent with a B2 CFR given the company's business risk profile.

As a holding company without any operating assets, BHIT relies on cash dividends upstreamed from its operating subsidiaries to service its debt. None of its media operating subsidiaries are directly nor wholly owned and, as such, dividends are also exposed to cash leakage.

MNC is the main source of dividend income for BHIT. And Moody's believes that BHIT, as a controlling shareholder, can likely seek higher dividend payouts from BMTR, MNC and other subsidiaries, if necessary.

However, Moody's also recognizes that there may be some limitation to the amount of dividends that can be ultimately upstreamed specifically by MNC to BHIT, given MNC's own debt maturities, including a USD250 million loan maturing in September 2017.

In Moody's opinion, this loan will need to be refinanced if MNC is to continue upstreaming a sufficient level of dividends to help BHIT support its own debt service requirements and fund its debt service reserve account as required under the bond indenture.

"We expect MNC to continue to generate stable cash flow and provide a sustainable source of dividends to BHIT. However, we believe coverage of interest at the BHIT level with cash dividends received from its subsidiaries, including MNC, will be around 0.5x-1.0x in 2016, which is well below the 1.5x level we had originally expected BHIT to maintain in support of a B1 CFR," says Di Chiara.

BHIT's lower interest coverage level reflects (1) higher absolute debt levels at BHIT and its subsidiaries, (2) rising interest costs associated with the USD debt at BHIT, Sky Vision and MNC (3) the impact of the depreciation of the Indonesian rupiah against the US dollar and currency mismatches between revenues and costs and (4) a limited amount of dividends received from BHIT's other non-media subsidiaries.

The negative outlook reflects lack of clarity around BHIT's financial policy with regard to the group's funding strategy, importantly including refinancing plans for maturing loans and shareholder return initiatives at its key media operating subsidiaries.

It also reflects BHIT's overall risk appetite, especially with regard to its plans to expand into riskier non-media businesses and our expectation that interest cover will remain weak over the next 12-18 months.

Upward rating pressure is unlikely over the near term given the negative outlook, however the outlook could return to stable should BHIT's operating subsidiaries address upcoming debt maturities over the next 12-18 months. Furthermore, interest coverage from cash dividends from operating subsidiaries sustained in the 1.5x range would further support a stable outlook.

On the other hand, further negative pressure could emerge should (1) BHIT's operating subsidiaries not address their refinancing needs in a timely manner, (2) leverage trend towards 5.0x on a consolidated basis reflecting debt funded share repurchases or more aggressive growth plans at media or non-media subsidiaries or (3) interest coverage from cash dividends from operating subsidiaries remaining below 1.0x on a sustained basis.

The principal methodology used in these ratings was Business and Consumer Service Industry published in December 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Headquartered in Jakarta, P.T. MNC Investama Tbk. (BHIT) is a listed investment holding company with strategic investments in operating companies in media, financial services, and energy and real estate.

In addition to P.T. Media Nusantara Citra and P.T. MNC Sky Vision. BHIT's other principal operating companies include P.T. MNC Kapital Indonesia Tbk, P.T. MNC Land, and P.T. MNC Energi.

The company also has portfolio investments in other private and public companies operating in transport, infrastructure and other industries. 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 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.

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
SUBSCRIBERS: (852) 3551-3077

Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (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
SUBSCRIBERS: (852) 3551-3077

Moody's downgrades MNC Investama's CFR to B2 and senior secured bond rating to B3; outlook negative
No Related Data.
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