Bakrie Telecom Downgraded by Fitch, S&P After Missed Coupon

PT Bakrie Telecom’s (BTEL) debt was downgraded to default by Standard & Poor’s and to a level signaling imminent default by Fitch Ratings Ltd. after failing to pay a $21.8 million coupon on a bond due yesterday.

Bakrie Telecom’s long-term foreign and local-currency rating and its May 2015 $380 million bond were cut to C from CC, Fitch said in a statement today. The company was unlikely to find the funds to pay the coupon within 30 days before a default is triggered, Fitch said. S&P cut the company’s long-term corporate credit rating to D from CC and its long-term ASEAN regional scale rating to D from axCC.

The Bakrie Group, whose patriach Aburizal Bakrie is running for Indonesia’s presidency next year, is also in talks with creditors on bonds issued by a property unit while its coal miner, PT Bumi Resources, has agreed to settle debt with China’s sovereign wealth fund by swapping part of it for an equity stake.

“We believe Bakrie Telecom is unlikely to be able to source the liquidity needed to pay the coupon within the grace period and that the company will to have to restructure some, or all, of its debt obligations,” Fitch said in the statement.

Bakrie Telecom’s 11.5 percent dollar bonds due May 2015 and sold to investors at par traded at 23.4 cents on the dollar today, after falling 24 cents this year, according to data compiled by Bloomberg. Bakrie Telecom shares traded unchanged at 50 rupiah per share, the lowest level possible on the Jakarta Composite Index.

Net Loss

Bakrie Telecom officials couldn’t be reached for comment after four calls to the company’s switchboard. President Commissioner Anindya Bakrie, the eldest son of Aburizal Bakrie, didn’t immediately respond to an e-mail seeking comment.

Bakrie Telecom posted a net loss of 1.5 trillion rupiah ($131 million) for the first nine months of 2013, wider than a 988 billion rupiah net loss in the same period a year earlier. It has total current liabilities of 4.4 trillion rupiah, more than six times its current assets, according to data compiled by Bloomberg. S&P lowered its rating on Bakrie Telecom’s senior unsecured notes due 2015 to CC from CCC on Nov. 6.

Fitch said the company’s rating could be further downgraded to RD in the event of a restructuring of the bond if it imposed a material reduction in terms, or non-payment of the coupon within the grace period. The company would need an equity injection or a merger deal with a stronger investor to see positive ratings action, it added.

To contact the reporter on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net; Neil Chatterjee at nchatterjee1@bloomberg.net

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