Saka’s Tender Offer Not DDE; Ratings Remain Under Pressure

(Fitch Ratings-Singapore-28 February 2022)-- Fitch Ratings says the tender offer launched by PT Saka Energi Indonesia (B+/Negative), if accepted by the holders of its USD625 million notes due 2024, has no immediate rating impact. However, Saka’s ratings remain under pressure, reflecting its weak operating profile and risk over parental support.

Saka plans to purchase for cash part of its outstanding 4.45% senior notes due 2024 for a total price of up to the tender cap. The purpose of the tender offer is to proactively manage its 2024 debt maturity.

Fitch regards Saka’s tender offer for part of its US dollar bonds as an opportunistic move and we do not treat it as a distressed debt exchange (DDE) since the company’s near-term liquidity remains adequate and its bond maturity in 2024 is more than 12 months away. Saka had USD267.3 million in readily available cash at 31 December 2021, while its debt maturities within 12 months are low at USD77.6 million. The tender offer, if successful, will reduce the refinancing requirement for Saka’s bonds when they mature in 2024. Nevertheless, we believe its cash flows will remain inadequate to fully repay the bonds and the company would require support from its parent, PT Perusahaan Gas Negara Tbk (BBB-/Stable).

Saka’s rating, which benefits from a two-notch uplift from its Standalone Credit Profile (SCP) of 'b-', based on Fitch's Parent and Subsidiary Linkage Rating Criteria, is under pressure from its weakening operating profile because of depleting proved oil and gas reserves, lack of clarity over its medium-term strategy and uncertain support from its parent. (ends)