PEFINDO assigns “idAA-” rating for PT Jasa Marga (Persero) Tbk’s Shelf Registered Bond Year 2020

(August 19, 2020)--PEFINDO has assigned its “idAA-” rating to PT Jasa Marga (Persero) Tbk (JSMR)’s proposed Shelf Registered Bond Year 2020 of up to IDR4.5 trillion, including the first phase issuance of up to IDR1 trillion that will be used for financing to subsidiaries for toll road completion and loan refinancing. PEFINDO has lowered its ratings for PT Jasa Marga (Persero) Tbk and JSMR’s Bond XIV Series JM-10 Year 2010 to “idAA-” from “idAA”. The outlook of the corporate rating is “stable”.

The rating downgrade reflects JSMR’s increasing financial leverage, with a projected debt to EBITDA ratio of more than 8x from additional debt of more than IDR10 trillion by its subsidiaries to finance the completion of toll road projects and potential higher debt by the holding company to maintain liquidity during the Coronavirus disease (COVID-19) pandemic, while its cash flow is lower due to a delayed tariff adjustment and declining daily toll revenue since mid March 2020 as a result of the government’s policy of large scale social restrictions in several areas to mitigate the pandemic spread. We have assigned a stable outlook as we view that although there is still uncertainty over when the pandemic will subside, the toll road sector will have quicker recovery compared to other transportation infrastructure sectors. We are also of the view that JSMR’s strong financial flexibility, as reflected by its good relationship with banks and good track record in fulfilling financial obligations to address the refinancing risk for its maturing bonds of IDR1 trillion in October 2020 and IDR4 trillion in December 2020.

An obligor rated idAA differs from the highest rated obligors only to a small degree, and has a very strong capacity to meet its long-term financial commitments relative to that of other Indonesian obligors. The Minus (-) sign indicates that the rating is relatively weak within the respective rating category.

The corporate rating reflects strong government support for completing toll road projects, JSMR’s dominant position in the toll road sector, its diversified toll road portfolio with long concession period, and its strong financial flexibility. The rating is constrained by its more aggressive capital structure in the near to medium term and business risks related to the development of new toll roads.

The rating will be raised if the Company improves its capital structure by deleveraging its debt, if its new toll roads are successfully operated as scheduled and consistently attract high traffic volume as projected, or if we view a stronger government support. The rating will be lowered if the pandemic-related restrictions are prolonged to the second half of the year, resulting in significantly lower toll revenue than anticipated; if it fails to obtain additional loan facilities to address the refinancing risk; or if its more aggressive capital structure is not compensated by an improving business performance, which could weaken its cash flow protection measures.

JSMR is the largest toll road operator in Indonesia. Its portfolio includes 13 old toll road concessions (Jagorawi, Jakarta-Tangerang, Ulujami-Pondok Aren, Jakarta Inner Ring Road (Cawang-Tomang-Pluit), Prof. Dr. Sedyatmo, Jakarta-Cikampek, Jakarta Outer Ring Road/JORR, Cikampek-Padalarang, Padaleunyi, Palikanci, Semarang, Surabaya-Gempol, and Belmera), 12 fully operated toll roads at subsidiaries (Nusa Dua-Ngurah Rai-Benoa, JORR W2N, Surabaya-Mojokerto, Solo-Ngawi, Semarang-Solo, Gempol-Pasuruan, BatangSemarang, Medan-Kualanamu-Tebing Tinggi, Gempol-Pandaan, Kunciran-Serpong, Jakarta-Cikampek II Elevated, and Pandaan-Malang), and 3 partially operated toll roads (Bogor Ring Road, Ngawi-Kertosono-Kediri, and Balikpapan-Samarinda). It is also in the process of land acquisition and construction on 5 toll road projects at subsidiaries (Cengkareng-Kunciran, Serpong-Cinere, Jakarta-Cikampek II South, Manado-Bitung, and Probolinggo-Banyuwangi). As of December 31, 2019, its shareholders were the Indonesian government (70.0%), BPJS Ketenagakerjaan (3.4%), PT Taspen (2.2%), and the public (24.4%). (ends)