Reorg on the Record; Spotlight on Asia
Fri Apr 16, 2021 1:26 pm Financial Restructuring

Written by Stephen Aldred, Managing Editor, Asia Core Credit || Indonesian textile company PT Sri Rejeki Isman Tbk’s (Sritex) restructuring will play out in an arena where the company has far narrower funding sources available. Sritex’s lenders are sounding the market to sell their holds. The company’s bonds are trading in the low to mid-30s and its unsecured loan debt is expected to price south of those marks.

Somewhat perversely, reduced funding sources may serve the company well, as increased scale has not improved Sritex’s operating efficiency. Sritex has generally seen a lengthening working capital cycle financed by debt, resulting in poor cash conversion despite higher reported earnings.

If Sritex de-prioritises growth and flatlines or reduce sales in the future, its working capital intensity could decrease, releasing cash towards debt-servicing (assuming limited impairments associated with its receivables – related party receivables have been growing, as has a growing stock of inventories). That could result in a more sustainable capital structure in the context of narrower sources of financing.  || Sign up for our weekly updates here.

Share this post:
Thank you for signing up
for Reorg on the Record!