Standard & Poor’s warns Indonesian firms could be heading for defaults as local handset retailer Trikomsel considers restructuring about S$215m (US$155m) of bonds. It marks the first such event to take place in Singapore’s bond market since the global financial crisis.
Trikomsel restructuring prompts default warning
Indonesian firms could be heading for defaults as local handset retailer Trikomsel (JKT:TRIO) considers restructuring about S$215m (US$155m) of bonds, ratings agency Standard & Poor’s has warned.
S&P said the move by Trikomsel, which sold a 19.9% stake to acquisitive Japanese telco Softbank (TYO:9984) in April, marks the first time a company has looked to restructure its debt in Singapore’s bond market since the global financial crisis.
“Standard & Poor’s notes that rising refinancing requirements are coinciding with a more cautious investor sentiment,” it said in a report.
“At the same time, much eroded balance sheets at a time of slower growth could trigger additional defaults or proactive debt restructuring over the next 12-18 months.”
Trikomsel revealed yesterday that it may not be able to meet its financial obligations indefinitely amid Indonesia’s slowing economy and the deprecation of its currency. The group said it will talk to holders of its notes, which are not rated by S&P, to discuss possible restructuring options.
The retailer’s reported debt nearly doubled over the past three years to reach about IDR6.2trn (US$455m) as of 30 June 2015. It boasted revenues of roughly IDR10.8trn (US$793m) in 2014, although S&P pointed out that this came from a relatively narrow line of business of selling mobile phones in Indonesia.
S&P credit analyst Xavier Jean said: “A default in Singapore’s local currency corporate bond market is so rare that investors will keenly watch the outcome of Trikomsel’s potential debt restructuring.
“Most of the company’s assets are in Indonesia, beyond the jurisdiction of its offshore creditors and the company has sizeable onshore working capital loans from domestic banks. That adds a layer of complexity to the debt restructuring exercise.”
The ratings agency estimates that about US$15bn of Singapore-dollar corporate bonds from about 200 different notes are set to mature next year, with that amount exceeding US$20bn in 2017.
“Whatever the outcome, funding costs in Singapore’s domestic bond market appear set to rise and investors will become more selective,” added Jean.
Financial details were not disclosed when Singapore-listed handset retailer Polaris (SGX:5BI) sold a fifth of Trikomsel to Softbank earlier this year, although the stake was valued at about US$120m based on the company’s stock price.
Polaris is still Trikomsel’s largest shareholder with a little less than 44.88%.
