IQPlus, (12/08) - Moody's Investors Service has downgraded the corporate family rating (CFR) of MNC Investama Tbk. (P.T.) (BHIT) to Caa1 from B3. At the same time, Moody's has downgraded BHIT's senior secured rating to Caa2 from Caa1.
The ratings outlook remains negative. Through its 48.95% stake in P.T. Global Mediacom Tbk (BMTR, unrated), BHIT has significant stakes in media operating companies, P.T. Media Nusantara Citra Tbk (MNCN, unrated) . Indonesia's (Baa2 stable) leading free-to-air (FTA) broadcast company . and P.T. MNC Vision Networks Tbk (IPTV, unrated), a leading broadband and pay-TV operator in Indonesia.
"The downgrade of BHIT's CFR to Caa1 reflects increasing refinancing risk . particularly at the holding company level . as BHIT's May 2021 bond maturity draws closer and dividend income from its subsidiaries remains low," says Annalisa Di Chiara, a Moody's Vice President and Senior Credit Officer.
As a holding company, BHIT generates a limited amount of operational cash flow aside from dividend income.
However, over the last 12 months BMTR has paid just IDR69 billion of dividends which translated into dividend income for BHIT of around IDR35-IDR40 billion based on its ownership stake; a level that is insufficient to cover annual interest expense on BHIT's bond of around USD10 million.
"We believe dividend income at BHIT will remain limited over the next 12 to 18 months, as its key media operating subsidiaries . including BMTR, MNCN and IPTV . address upcoming debt maturities, ongoing amortization payments and focus on their own shareholder initiatives," adds Di Chiara, who is also Moody's Lead Analyst for BHIT.
BHIT's liquidity position, on a standalone basis, will remain weak. As such, Moody's anticipates that the repayment of BHIT's bond in May 2021 will depend on capital raising activities, the timing of which is unclear and ultimately market sensitive.
While dividend income will likely be insufficient to cover interest expense on BHIT's bond, management has confirmed to Moody's that a portion of short-term investments held at the holding company can be monetized as needed to support interest payments.
In addition, according to BHIT's offering circular, the company is required to maintain a debt service reserve account (DSRA) equal to one semi-annual interest payment. According to BHIT's latest quarterly financial report, the DSRA was fully funded as of 30 June 2019. The next interest payment of USD10 million is due in November 2019. (end)
