Fitch Ratings lowered PT Sri Rejeki Isman Tbk (Sritex / SRIL) on the long-term rating of the issuer default rating (IDR) to 'B-' from 'BB-'.

Fitch has also downgraded its outstanding and current Sritex US dollar debt securities to be 'B -' / 'RR4' from 'BB-'.

At the same time, Fitch Ratings Indonesia has downgraded Sritex's long-term national rating to 'BB (idn)' from 'A + (idn)'. Fitch has placed the Sritex rating in the Negative Rating Watch (RWN).

"The rating downgrade is based on an increase in liquidity risk and refinancing risk arising from uncertainty related to the extension of Sritex syndicated loan worth US $ 350 million which will mature in January 2022. RWN reflects the uncertainty of implementing the refinancing plan," wrote Fitch in his publication quoted on Friday (26 / 3).

Fitch assesses Sritex's credit profile is under pressure due to uncertainty about the continuing delays in completing the US$350 million syndicated loan extension, which is due in January 2022.

In November 2020, Sritex requested a loan extension until January 2024. Fitch understands that Sritex has obtained several lender approvals, totaling US$205 million as of March 23, 2021.

However, the signing delay has led to several notches downgrading due to no final agreement and in the context of negative sentiment towards Indonesia's textile sector.

"We estimate Sritex's net debt / EBITDA will remain above 3.0x in 2021, with minimal EBITDA growth due to limited capacity. The improvement of Sritex's leverage from 2021 onwards will depend on a significant reduction in working capital days, which have increased since 2018, "he explained.