Bloomberg, JG

CVC Hires CIMB, Standard Chartered To Help Raise Matahari Buyout Cash

UK buyout firm CVC Capital Partners has hired two banks to help it raise cash to fund its planned purchase of the retail unit of PT Matahari Putra Prima, said a person familiar with the matter.

CIMB Group Holdings and Standard Chartered will help London-based CVC raise as much as Rp 3.77 trillion ($403.4 million) in leveraged loans, the unnamed source said.

Matahari, Indonesia’s biggest retailer, announced the sale of 90.76 percent of PT Matahari Department Store to the CVC-backed Meadow Asia for Rp 7.2 trillion on Monday. Meadow will buy another 7.24 percent from shareholders. Matahari plans to buy 20 percent of Meadow, the Jakarta-based company said.

Meadow gains a department-store operator with 88 locations in Indonesia, where retail sales growth accelerated to 33.9 percent in November, the fastest pace in two years.

CVC can’t comment beyond the written statements it has already issued, spokesman Joe Little said.

A CIMB spokeswoman in Kuala Lumpur declined to comment, and a Standard Chartered spokeswoman in Singapore said she was unable to comment because the transaction hadn’t closed.

Standard & Poor’s said on Wednesday it had placed its ‘B+’ corporate credit rating and ‘axBB’ Asean scale rating on Matahari on CreditWatch with “negative implications.”

S&P also placed the rating on $200 million of 10.75 percent senior notes due Aug. 7, 2012, issued by Matahari’s wholly owned subsidiary Matahari International, on CreditWatch with negative implications.

“Matahari’s main business, and the source of most of its cash flow, will be its food business, which for the nine months ended September 2009 contributed 46 percent of Matahari’s consolidated sales of Rp 10.4 trillion,” S&P credit analyst Manuel Guerena said. “Margins in the food business are less than half of those of Matahari Department Store, the retail unit being sold.”

However, while the business profile will likely be smaller and less diversified, Matahari’s financial risk profile will depend on how it decides to strengthen its business once the sale of Matahari Department Store is executed, including its resulting debt level, Guerena said.

As of September 2009, Matahari’s balance sheet financial obligations amounted to Rp 4 trillion, while its cash and short-term investment balance was Rp 3.7 trillion, excluding the divestment proceeds of about $770 million.

Matahari’s shares lost 3.2 percent on Wednesday, after gaining 23 percent in the previous two days.

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