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May 30 (The following statement was released by the rating agency)
Fitch Ratings has downgraded the Long-Term Foreign Currency and Local Currency Issuer Default Rating (IDR) of PT Bakrie Telecom Tbk (BTEL) to 'Restricted Default' (RD) of 'C'. USD380 million bonds maturing in May 2015 that guaranteed entirely by BTEL also been affirmed at 'C' while the Recovery Rating of debt has been downgraded to 'RR5' from 'RR4'.
Factors Fueling Rating
Restricted Default: The downgrade to 'RD' resulting from not improvement of defaulted coupon payment in November 2013 and the not a continuation of the payment coupon or public announcements regarding the development of debt restructuring talks with creditors.
DDE is Inevitable: Fitch believes that distressed debt exchange (DDE) is difficult to avoid, which would cause huge losses to shareholders hutangsejumlah letter USD380 million. The debentures are now trading at 11 cents on the dollar, indicates a high probability of loss economical price.
Rating lowered Recovery: Recovery rating 'RR5' reflects the decline enterprise value of the company's business since 2014 EBITDA possibility will go down to around IDR600 billion - IDR700 billion (2013: IDR911 billion). BTEL will be difficult to add customers and increase average revenue per customer (ARPU) in 2014. In 1Q2014, the ARPU of BTEL fell by 19% yoy be IDR13, 000/bulan because the company tried to raise its customer base to 12 million (1Q2013: 11.6 million). Fitch believes that it will BTEL generate funds flow from operations were minimal in 2014 due to EBITDA will less than interest payments and taxes.
Significant Liquidity Pressure: At the end of March 2014, the liquidity of BTEL very strict with EBITDA amounting to IDR160 billion per quarter and the amount of cash amounting to IDR30 billion which is very low when compared with term debt short maturity of IDR1.3 trillion and short-term liabilities by IDR3.9 trillion. BTEL has a low ability to finance back bank loans and bonds.
M & A Small Possibility: Fitch believes that a stronger operator or investors are unlikely to be acquired BTEL as Code Division Multiple Access (CDMA) lost its appeal on an ongoing basis to customers. CDMA operators such as Telecom Tbk PT Smartfren (CC (idn)) continue difficult to gain market share and faced liquidity problems. three most major operators in Indonesia, which uses GSM technology has assets sufficient spectrum. The market leader PT Telekomunikasi Indonesia Tbk (BBB-/Stabil) and the second largest operator PT Indosat (BBB / Stable) also plan CDMA segment to stop them and reallocate the spectrum for use GSM.
Positive: future developments that may, individually or raise the collective level, among others:
- Solution of BTEL DDE followed by repeated fractionation based The new capital structure
- Additional capital or M & A transactions with large operators or stronger investor, even though it is less likely to occur in short time
Negative: future developments that may, individually or lowering the collective inter alia:
- If BTEL filed bankruptcy, administration, receivership, liquidation or Other sales procedure or stop its