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Fitch gives Indonesia'€™s Multipolar a '€˜B+'€™ rating

Ratings agency Fitch Ratings has assigned Indonesia-based retailer PT Multipolar (MLPL) a long-term issuer default rating (IDR) of “B+” with stable outlook

The Jakarta Post
Sat, July 13, 2013

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Fitch gives Indonesia'€™s Multipolar a '€˜B+'€™ rating

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atings agency Fitch Ratings has assigned Indonesia-based retailer PT Multipolar (MLPL) a long-term issuer default rating (IDR) of '€œB+'€ with stable outlook.

The agency has also assigned MLPL a senior unsecured '€œB+'€ rating and its proposed senior unsecured US Dollar notes an expected '€œB+(EXP)'€ rating, with a Recovery Rating of '€œRR4'€.

The proposed notes are to be issued by Pacific Emerald Pte Ltd and guaranteed by Multipolar and certain subsidiaries. The final rating is contingent upon receipt of documents conforming to information already received.

'€œMLPL'€™s ratings largely reflect its holding company structure and its high dependence on dividends. The ratings, however, also recognize the group'€™s solid market position in the Indonesian retail sector, which is supported by favorable macroeconomic conditions,'€ Fitch said in an official press release.

MLPL'€™s holding company structure means that its cash flows are structurally subordinated to the obligations of its operating subsidiaries, in particular, PT Matahari Putra Prima (MPPA) and PT Matahari Department Store (MDS), which together represent more than 50 percent of MLPL'€™s cash flows.

'€œAs such, MLPL'€™s capacity to meet its debt obligations is therefore contingent upon MPPA'€™s and MDS'€™s ability to continue distributing dividends,'€ Fitch said.

Notwithstanding, MPPA'€™s and MDS'€™ strong cash-generating ability and their moderate leverage, their strategy to lease retail space exposes both companies to the risk of rising rental expenses and results in weaker credit metrics compared to other rated peers with a self-owned property strategy, says Fitch.

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