Fitch Affirms GEAR at 'B+'; Outlook Stable

Stanmore: The GC EBITDA estimate of USD40 million (FY20E: USD 53million) re ects Fitch's view of a sustainable, post-reorganisation EBITDA level upon which we base the EV. We have taken a lower sustainable EBITDA as a restructuring would most likely be the result of a downturn in the coal market. An EV multiple of 3.5x EBITDA is applied to the GC EBITDA to calculate a post- reorganisation EV. The choice of this multiple takes into consideration the EV/EBITDA multiple used in M&A transactions in the sector through the commodity cycle. In the recovery analysis, we assume drawdown and repayment of Stanmore's committed working capital facility. We have assumed 60% of the remaining equity value (post the repayment of subsidiary debt) for the repayment of debt at GEAR level.

This results in a Recovery Rating of 'RR2', but a soft cap of 'RR4' is applied as the key assets are located in Indonesia, which is a group D country.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

- GEAR's holding company's standalone EBITDA/interest cover of above 3.0x on a sustained basis;

- Sustainable improvement in the scale of operations for the group;

- Net adjusted debt/EBITDAR of less than 2.5x, based on a proportionate consolidation of GEMS and full consolidation of Stanmore adjusted for minority interests.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

- GEAR's holding company's standalone EBITDA/interest cover of below 2.0x;

- Net adjusted debt/EBITDAR of more than 3.5x, based on a proportionate consolidation of GEMS and full consolidation of Stanmore adjusted for minority interests.