Spotlight on: Sritex
Over nine years, the Reorg team has analyzed 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 Sri Rejeki Isman Tbk, or Sritex, is an Indonesian textile producer.
Reorg’s financial analysts, reporters and legal analysts have covered this topical credit extensively since mid-2019, following the default of its competitor Duniatex, which hit bond prices for a slew of Indonesian names.
Our exclusive coverage gave clients detailed in-depth reporting and analysis on key news developments, and significant legal and financial considerations, throughout the company’s recent, and highly controversial, in-court supervised restructuring, or PKPU process.
January 11, 2021
Reorg reports from an investor call that Sritex’s management see issuing new $325 million
five-year notes as ‘binary’ because of the potential impact on its existing notes from fellow Indonesian textile maker Pan Brothers, which faces an imminent deadline to refinance a $138.5 million RCF.
January 13, 2021
Reorg analyzes Sritex’s proposed new notes, noting potentially inflated reported adjusted EBITDA figures by $34.4 million for LTM Q3’20, due to reclassifications of certain write-offs related to a warehouse fire to an earlier calendar date.
March 31, 2021
Reorg breaks news that Sritex has told its bank lenders that it plans a restructuring due to the impact of Covid-19 on its business.
April 1, 2021
Reorg discusses how both its debt problems and working capital intensity point to Sritex eventually seeking an in-court restructuring, likely a PKPU in Indonesia, effecting a moratorium to preserve liquidity since it has been unable to extend its debt. The analysis further considers key structural considerations between various debts for creditors should the company file a PKPU, providing a summary of similar transactions and relevant litigation.
April 19, 2021
Reorg breaks news that a trade creditor – CV Prima Karya – has filed a petition to place Sritex and three of its subsidiaries into a PKPU. Reorg’s coverage also highlights potential social links between Prima Karya and members of Sritex’s controlling Luminto family.
April 22, 2021
Reorg reports that Sritex subsidiaries Golden Legacy Pte Ltd. and Golden Mountain Textile and Trading Pte Ltd, issuer of the due 2024 notes, file an application for moratorium protection to the Singapore High Court. The application is to buy time to complete restructuring discussions in light of the Prima Karya PKPU petition. Reorg reports on April 23 from sources that bank lenders are close to appointing Borelli Walsh (Kroll) as financial advisor, while Clifford Chance is organizing a bondholder call on the same day, and Hogan Lovells has teamed up with KordaMentha to pitch holders.
April 30, 2021
In a move that sets the tone for events to come, Sritex sends a letter to the informal steering committee for its $350 million loan, questioning their choice of Borrelli Walsh as financial advisor, Reorg journalists report after obtaining a copy of the letter. Permata and Bank of China exit the ISC, according to sources.
May 5, 2021
Judges at the Semarang Commercial Court place Rayon Makmur into PKPU, Reorg reports from sources. On May 6, the same court places Sritex and three subsidiaries into PKPU, Reorg reports from sources. Reorg’s journalists report the same day from sources that Clifford Chance has been appointed legal advisor to a group of holders of the $150 million notes due 2024 and $225 million notes due 2025. On May 11, Reorg reports that Clifford Chance is blocked from a meeting of holders of the due 2024 notes hosted by Sritex subsidiary Golden Legacy. At that meeting, Reorg journalists disclose, the company asserts holders of the 2024 notes will be entitled to vote separately in a scheme of arrangement in the Singapore scheme proceedings.
June 3, 2021
Reorg publishes detailed legal analysis discussing conditions imposed by the Singapore court on Sritex’s moratorium applications, and its attempt to protect creditor rights.
July 7, 2021
The U.S. Bankruptcy Court for the Southern District of New York grants the chapter 15 recognition request of Sritex and three of its subsidiaries, along with the two Singapore entities, Golden Legacy and Golden Mountain Textile and Trading.
August 19, 2021
Reorg publishes analysis based on information obtained by journalists from a Sritex investor call. From consolidated cash flows provided, our estimated enterprise value of $530.7 million to $733.5 million is substantially below PKPU verified claims of $1.8 billion and suggests creditors may be shown a restructuring proposal entailing significant principal haircuts.
October 26, 2021
Reorg journalists obtain a revised draft restructuring proposal which shows Sritex now offering to swap creditors’ debt into a seven-year senior secured revolving working capital facility, a nine-year secured term loan, a mandatory convertible loan (MCL) and an unsecured term loan.
November 15, 2021
Reorg journalists again obtain revised restructuring terms, from a presentation by Deloitte, financial advisor to bilateral lenders, showing the senior secured RCF tenor reduced to five years from seven. Deloitte states $150 million in new money is essential to operation of the business. On Nov. 18, Sritex guides that if creditors fail to approve the composition plan, the company will enter liquidation and creditors will receive around 8 cents on the dollar.
January 17, 2022
Sritex files a revised composition plan – following a further revision on Dec. 29. – which includes a proposal for a $100 million capital raising within three years from June 30. Kroll had stated on January 13 that the AHG of noteholders had rejected the Dec. 29 plan and offered an alternative composition plan, noting the AHG would vote against the plan if further amendments were not made.
January 21, 2022
Reorg breaks news ahead of the judges’ ruling that a majority of creditors had voted in favor of the composition plan, but further reporting then reveals that votes of Citibank and Taipei Fubon Commercial Bank – which would have voted against the plan, were not included in the final tally.
January 25, 2022
Reorg breaks news that the Semarang Commercial Court has approved the Sritex composition plan.
January 28, 2022
Reorg reports that preliminary estimates from Kroll show vote tallies including Citi and Taipei Fubon would have created a blocking vote of unsecured creditors against the composition plan. Significantly, Sritex voted guarantees against various borrowings against claims.
February 2, 2022
Citibank and QNB Indonesia file a cassation case against Sritex protesting the vote. If the case succeeds, Sritex will enter bankruptcy under Indonesian law. On Feb. 18, 2022, Sritex submits a counter memorandum of cassation to the court.
March 29, 2022
Sritex’s nine-month consolidated financial results for the period ending Sept. 30, 2021, show net sales of $637.1 million, down 29.8% year over year from $907.1 million. Over the same period, the company recorded a net loss of $924.5 million, reversing from a $73.8 million net profit a year earlier.
May 18, 2022
Reorg reports Citibank withdraws its cassation case.
Editor’s Note: The fallout from the Sritex restructuring is ongoing. For Indonesian borrowers, it has compounded the impact of the collapse of the China real estate high-yield bond market, and financing options for many names is now largely restricted to local bank financing. Sritex is awaiting the result of the cassation case from the Supreme Court, before it can finalize its restructuring plan, and is relying on internal funds for operations while running at 60% factory utilization.