Sritex updates noteholder composition plan with creditor feedback

Chicago, Jan. 3 – Indonesia’s PT Sri Rejeki Isman Tbk. (Sritex) started to circulate an updated composition plan for voting at the PKPU proceeding, according to a notice.

The notice is aimed at noteholders of the $150 million 6 7/8% senior notes due 2024 (Cusips: 38109KAC9, Y2749KAC4) issued by subsidiary Golden Legacy Pte. Ltd. and guaranteed by Sritex and the $225 million 7¼% senior notes due 2025 (Cusips: 69408LAB2, Y714AGAB8) issued by Sritex.

The updated plan, with creditor feedback, provides “significantly improved terms to its creditors,” according to the company.

Now, with the changes, noteholders will receive an additional tranche of secured notes with a five-year tenor. There will be a total of two tranches of secured notes.

The security coverage ratio of both tranches of the secured notes has been increased to 108%.

The sponsors have agreed to provide further support as necessary for the restructuring of the Sritex Group, including through the sale of or by encumbering the sponsors’ personal assets to raise working capital for the Sritex Group.

The updated plan will exchange the existing notes for an aggregate of $105 million tranche A secured notes, $135 million tranche B secured notes and $135 million tranche C convertible notes all to be issued by PT Sri Rejeki Isman Tbk.

The tranche A notes will have a step-up interest payment, starting at 1 3/8%, moving up to 1 7/8% in year two, 2 3/8% in year three and 2½% in years four and five. There will be a single balloon payment in the fifth year.

For the tranche B secured notes, interest will be a combination of cash and payment in kind. The total coupon is 2%, with the breakdown shifting year to year. The notes start with a 3/8% cash coupon and 1 5/8% paid in kind. In year two, it is 7/8% cash and 1 1/8% PIK; in year three it is 1 3/8% cash and 5/8% PIK and then the coupon is all cash starting in year four.

For the tranche B notes, amortization is annual throughout the nine years with further periodic early redemption on an annual basis through a reverse Dutch auction.

In terms of the convertible notes, there would be a mandatory conversion into ordinary shares on the fifth year based on the fair and reasonable value.

If elected, the tranche C long-term notes will have a final maturity date in the 12th year for all amounts unpaid. There would be a step-up interest rate of 0.1% per year for the first nine years and then 2% thereafter.

Voting instructions can be accepted through 5 p.m. ET on Jan. 19.

The creditor meeting is on Jan. 21.

The record date is Jan. 18.

Noteholders representing at least 66 2/3 of each class of notes must approve the plan.

If the voting threshold is not met, the company and its subsidiaries in Indonesia may be forced into liquidation.

The company is clear. Option A is the composition plan which needs the votes of creditors to be approved. Option B is liquidation. In the event of liquidation, noteholders are expected to receive up to 8 cents on the dollar.

Morrow Sodali Ltd. is the information and tabulation agent (+852 2319 4130, 203 609-4910, +44 20 4513 6933, sritex@investor.morrowsodali.com; https://bonds.morrowsodali.com/sritex).

Sritex is an Indonesian textile manufacturer.

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