CREDIT RATING DOWNGRADED AND OPTIMAL CAPITAL STRUCTURE ANALYSIS: CASE OF PT. SRI REJEKI ISMAN

• Main Author: Christiandy, Kevin
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/56827
• Institution: Institut Teknologi Bandung

The COVID-19 pandemic has increased credit risk of many companies. The number of companies facing potential credit rating downgrades has reached all time high as rating drift plummeted to minus 22% in 2020. PT. Sri Rejeki Isman or Sritex is one of Indonesian textile and garment manufacturers that also faces credit rating downgrade. Moody’s credit rating agency downgraded Sritex’s from Ba3 to B1 per December 2020. This credit rating downgrade may have negative impacts to the firm performance due to the higher cost of financing. This research analyzes the root cause of this credit rating downgrade and provide alternative solutions for Sritex to upgrade its credit rating using financial performance and optimal capital structure analysis. The findings show that the root causes are liquidity, profitability, and efficiency, and financial leverage problems. This research suggests several financial strategies that could be applied by Sritex improve its credit rating. The research will provide implications to Sritex on managing through difficult economic condition and debtholders on evaluating the financial condition of Sritex.