Lenders to Pan Brothers $138.5M RCF Near Standstill to End-Jan., Could Sign Next Week; Seek Clarity on Cash Flow Projections, Account Receivables

Lenders to PT Pan Brothers Tbk’s $138.5 million revolving credit facility (RCF) due Feb. 1 (as per the 9M’20 financials) are close to agreeing a standstill until the end of January, and will likely sign this early next week, according to two sources close to the situation. Continue reading for the Asia Core Credit team's analysis of PT Pan Brothers Tbk's RCF standstill, and request a trial to access reporting and analysis of hundreds of other stressed, distressed and performing credits in the region.

Lenders consent to the standstill will achieve two things.

First, it will enable the company to call an extraordinary general meeting (EGM) for a shareholder vote on its proposed $350 million five-year USD bonds. An earlier planned Jan. 6 EGM was postponed after Indonesia’s Financial Services Authority (OJK) queried the company’s ability to issue the proposed bonds given potential restrictions in existing debt documents, as reported.

Secondly, a condition of the standstill is that the company will provide financial information to the lenders’ financial advisor Borrelli Walsh, including cash flow projections and details of accounts receivables, to enable them to assess its capital needs.

The standstill under negotiation does not include a maturity extension of the RCF, and only stipulates that the lenders agree not to take any enforcement action against the company during the standstill period, the sources explained.

As explained in Reorg’s earlier analysis, such an outcome could lead to an event of default under the company $171.1 million due 2022 senior notes.

The duration of the standstill is a fluid discussion, sources said, adding that a further standstill extension is under discussion, should the company successfully come to the market with the proposed bond issuance - unlikely as it may be according to Reorg’s earlier analysis. Pan Brothers’ peer, Sritex, failed to price a $325 million due 2026 new bond earlier this week, partly because of Pan Brothers problems, as reported.

Further, Pan Brothers’ 9M’20 financials would be stale by Feb. 12 for its contemplated issuance because of the 135-day rule associated with US 144A note offerings.

One key item flagged by the lenders during the standstill negotiations is the size of the equity injection expected from the company and the clarity on the source of funds for such an injection, the sources said. This will allow the banks to more accurately estimate the company’s funding requirements, the sources added.

As reported, holders of the RCF have been sounded by two separate banks, with one bidding at 85, and one bank making a market in the 80/90 context.

Linklaters is lenders’ counsel, two separate sources said. The company has appointed financial advisory firm AJCapital Advisory Pte Ltd. and the Indonesian arm of law firm Baker McKenzie, Hadiputranto, Hadinoto & Partners (HHP Law Firm), as financial and legal advisors, respectively, as previously reported.

Pan Brothers vice president director Anne Patricia Sutanto declined to comment on the standstill negotiations with the company’s lenders but confirmed that Pan Brothers still plans to proceed with the USD bond. Borrelli Walsh declined to comment.