PT Sri Rejeki Isman Tbk (SRIL) is issuing bonds in Singapore worth US$ 350 million or equivalent to Rp4.78 trillion. This transaction risks making the company tied to several covenants that may limit the ability of the company to finance the business, meet the capital requirements, or grab business opportunities in the future. On the other hand, the bonds will make its liquidity in the future better than the average of the textile industry, thus improving its profitability.
Based on the analysis of the financial impact, the management stated that the current ratio and the quick ratio before and after transactions only rose 0.01 times. In terms of solvency, the ratio of debt to equity ratio (DER) and fixed charge coverage (FCC) only rose insignificantly by 0.07% and 0.03 times. The company’s financial report as per December 2015 showed its DER to reach 1.83 times whiles the FCC by 2.5 times.
In its prospectus, the company will issue the bonds through the Golden Legacy Pte Ltd, a company that is incorporated and subject to the laws of Singapore and is 100% controlled by Sri Rejeki Isman. The company plans to use the proceeds from the bond offering to repurchase (buyback) the senior debt maturing in 2019 through a tender offer worth US$ 180.2 million. The remainder will be used to repay working capital loans as well as to support the company’s business. Debt will be refinanced and has a 9% interest per year, while bonds issued offer interest of 8.25% per year and will mature in 2021. The initial buyers of the bonds are Citigroup Global Markets Singapore Pte Ltd and The Hongkong and Shanghai Banking Corporation Ltd branch Singapore. (*)
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