Fitch rates Modernland notes B

Fitch Ratings said it assigned an expected rating of B to PT Modernland Realty Tbk.'s proposed dollar-denominated senior unsecured notes with a recovery rating of RR4.

The notes will be issued by Modernland's wholly owned subsidiary, Modernland Overseas Pte Ltd., Fitch said, and guaranteed by Modernland and certain subsidiaries.

The agency said it believes Modernland's financial profile will remain unchanged and consistent with its rating as proceeds from the new notes will be used mainly for refinancing and to extend the maturity profile of the company's debt, allowing it more flexibility to manage cash flows.

The proceeds will be used to partly redeem its existing $248 million 9 ¾% senior unsecured notes due in 2019.

The notes are rated at the same level as Modernland's senior unsecured rating as they represent unconditional, unsecured and unsubordinated obligations, Fitch noted.

The ratings reflect the risk that the company could breach a number of its local-currency debt covenants in 2017, the agency said, as EBITDA may remain weak unless presales improve in the next six to 12 months.

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