JAKARTA. Moody's Investors Service downgraded its rating for PT Gajah Tunggal Tbk (GJTL) and its bonds with a total value of US$ 250 million from "B3" to "Caa1" with a negative outlook.
This because Gajah Tunggal is vulnerable to the weakening of the rupiah which, if it continues, will increase the company's burden. This will reduce profits and cash flow, and increase the dependence of Gajah Tunggal on short-term funding.
Moody's estimates that if the exchange rate of rupiah against the US dollar fell by 10%, Gajah Tunggal's EBITDA margin will drop by 2%.
According to Moody's, as of 30 September 2019, out of the company's total long-term debt of US$ 397 million, only US$ 184 million was hedged. Furthermore, hedging only protects the principal up to an exchange rate of Rp 14,811 per US dollar while interest costs remain unhedged .
Moody's considered that GJTL is also very dependent on short-term working capital loans, most of them will mature in August 2020. The current unstable capital market conditions exacerbate the risk of refinancing for these loans. (AM/AR)