Fri 10/08/2021 08:07 AM
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Indonesian vertically integrated textile maker PT Sri Rejeki Isman Tbk (Sritex) may be able to reduce the “unsustainable” debt portion of $753 million and an $850 million refinancing requirement on year 15 - based on its earlier reported draft composition plan - by about 30%, as well as reduce the tenor for its new notes in exchange for its $150 million 6.875% senior notes due 2024 and $225 million 7.25% senior notes due 2025 to 10 years from the earlier proposed 15 years, according to two sources with knowledge of the matter.

Additionally, based on indicative findings from Nexia’s independent audit of Sritex’s financials shared by AJ Capital - the company’s international restructuring advisor - Sritex is expecting an opening working capital balance of roughly $300 million in total receivables and inventory realisable value, implying material impairment, the sources said.

See Reorg’s coverage of Sritex’s last reported set of financials HERE.

The information was communicated by Deloitte, financial advisor to Sritex’s bilateral lenders, to the bilateral lenders steering committee (SteerCo) at its first meeting on Wednesday, Oct. 6. The revised terms of Sritex’s draft composition plan were based on the Nexia findings and the addition of opening liquidity, based on discussions between AJ Capital, Deloitte, and Ginting & Reksodiputro, the SteerCo’s legal advisor. The bilateral lenders SteerCo comprises Bank Negara Indonesia, Bank Central Asia, Bank of China, HSBC and Permata Bank, as reported.

According to the sources, Deloitte noted that due to the scale of the impairment, the sample testing for the company’s audit should be expanded to improve confidence in its findings.

As reported, Nexia is auditing Sritex’s financials and opening working capital balances and is expected to report its findings this month.

The sources said that Sritex is also seeking interest from bilateral lenders on a potential equity exchange on the unsustainable tranche and whether they are open to a new working facility.

Separately, Deloitte told the SteerCo during the meeting that it is assessing the situation for the sale of Sritex’s non-core assets, and is seeking for KJPP valuation appraisals on all PPE as well as utilisation data from the company.

According to AJ Capital, the KJPP asset valuation is expected to be finalised by early November, and while Sritex has told Deloitte that it has no “non-core” or “under-utilised” assets, Deloitte is seeking to either push for security or push for the sale of assets.

At the same time, Deloitte is also pressing Sritex for full disclosure and access to the company’s working capital data, which it still has yet to receive. However, AJ Capital guided that the receivables and inventory data would be available in mid-October after release of the Nexia report, the sources added.

During the meeting, the sources said that the SteerCo, along with Deloitte and Ginting & Reksodiputro, agreed on the need to push Sritex for greater transparency in providing information, to allow bilateral lenders and advisors to negotiate better restructuring terms.

Deloitte, AJCapital and Ginting & Reksodiputro did not respond to requests for comment.

-- Rae Wee, Sarah Yuniarni
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