Spotlight on: Saka Energi

Over nine years, the Reorg team has analysed thousands of performing and distressed credits. Our expert team of financial analysts, legal analysts and journalists produce granular capital structures, primary analysis, tear sheets, waterfall models and more.

With long and deep connections to credible sources, we publish up-to-the minute news to help you stay ahead. In this case study, we’re highlighting one example showcasing the ongoing credit insights that Reorg’s team provide day in, day out to enhance efficiency and improve decision making for more than 25,000  investors, advisors and lawyers.

PT Saka Energi Indonesia (Saka): An upstream oil and gas business engaging in the exploration, development and production of natural gas and crude oil. Saka’s role is to execute its parent company PT Perusahaan Gas Negara Tbk (PGAS)’s long-term upstream strategy and expand Indonesia’s energy infrastructure.

In an analysis published in June 8, 2020, Reorg highlighted that Saka’s relationships with PGAS and stated-owned PT Pertamina (Persero) exposed PGAS and Pertamina to significant cross default risks if Saka defaulted on any of its debts, including its $625 million 4.45% senior notes due May 2024. Reorg further pointed out the possibility for PGAS to roll over its sharedholder’s loan to Saka should Saka’s liquidity profile deteriorate further – given PGAS’s strong liquidity position and willingness to maintain easy access to the international capital markets of its group entities.

January 5, 2021 

Saka Energi, in an announcement by parent company PGAS on Jan. 5, announced that the company has signed an amendment to its shareholder loan agreement to extend the maturity date for 50% of the current portion of its shareholder loan to January 6, 2022.

March 3, 2021

Reorg publishes a tear sheet detailing the liquidity issue facing Saka, based on different potential outcomes of its judicial review on tax dispute regarding its acquisition of Pangkah PSC through SIPL.

Amid the perception of weakening support from its parent company, Saka’s 4.45% due 2024 senior notes trended down to low 80s in early March. Reorg, in its tear sheet, suggests that PGAS remains obligated to support Saka as long as Saka remains a “material subsidiary”, with reference to an earlier analysis on Saka’s cross-default implications published by Reorg on June 8, 2020.

May 25, 2021

Reorg publishes a conservative valuation model, indicating limited downside risks and an estimated recovery value of low-to-mid-70s for Saka’s 4.45% due 2024 senior notes. On the same day, sources tell Reorg that Pertamina, Saka’s ultimate parent company, is committed to supporting Saka’s liquidity profile.

May 26, 2021

Following the report published by Reorg, the 4.45% due 2024 senior notes trade up around 7 points.

May 27, 2021

In an email response to Reorg’s questions, Pertamina says they encourage PGAS to carry out an extension of its shareholders’ loan to Saka.

June 22, 2021

Pertamina’s management reaffirmed that Pertamina is committed to the sustainability of Saka’s operations and ensuring that Saka remains a going concern; Following the reaffirmation, the price of 4.45% due 2024 senior notes increased to mid-90s.

August 17, 2021

Reorg reported that Saka, in an investor update, says that they are not liable to pay $127.7 million of tax penalties in relation to the acquisition of Pangkah PSC through SIPL and will not receive the $19.9 million of tax penalty refund for SPLLC.

September 3, 2021

Saka says in an email that PGAS approved to extend both short-term and long-term portions of its shareholder loans to Saka, which aligns with Reorg’s earlier estimation that PGAS remains obligated to support Saka.

February 28, 2022

Saka Energi commenced a cash tender offer to purchase up to $200 million of its outstanding $625 million 4.45% senior notes due 2024 at 97.75. Reorg has highlighted the key terms of the offer.

March 17, 2022

Saka completed the repurchase of $220 million principal amount of its $625 million 4.45% senior notes due 2024 at the early settlement date. The notes have been cancelled and $405 million principal amount of notes remains outstanding.

Reorg concludes that Saka’s liquidity position has improved following the extension of its shareholder loans and the completion of the notes repurchase. Its next mature debt is its $77.6 million shareholder loan coming due in January 2023.

Junguang Tan Director  jtan@reorg.com