PEFINDO assigns PT Waskita Karya (Persero) Tbk’s proposed bond and sukuk at “idAAA(gg)”

(April 25, 2022)--PEFINDO has assigned “idAAA(gg)” rating to PT Waskita Karya (Persero) Tbk (WSKT)’s proposed bond of maximum IDR2.7 trillion and “idAAA(sy)(gg)” to the proposed sukuk of maximum IDR1.1 trillion. About IDR827 billion of the proposed bond and/or sukuk will be guaranteed by PT Penjaminan Infrastruktur Indonesia (Persero) on behalf of the government of Indonesia and the remainder will be guaranteed by the government. The proceeds will be used to repay WSKT’s bonds maturities and for working capital. At the same time, we have also affirmed the ratings for WSKT and its shelf-registered bonds II, shelf-registered bonds III, and shelf-registered bonds IV at “idBBB” as well as its bond III at “idAAA(gg)”. The outlook for the corporate rating was revised to “stable” as proceeds from the bond and sukuk issuance will effectively reduce short-term refinancing risk associated with its 2022 maturing bonds.

An obligor rated idBBB has an adequate capacity to meet its long-term financial commitments relative to those of other Indonesian obligors. However, adverse economic conditions or changing circumstances are more likely to weaken its capacity to meet its f inancial commitments.

A debt security rated idAAA has the highest rating assigned by PEFINDO. The issuer’s capacity to meet its long-term financial commitments on the debt security, relative to other Indonesian issuers, is superior. The suffix (sy) means the rating mandates compliance with Islamic principles. The suffix (gg) in a particular rating incorporates security in the form of government guarantee.

The corporate rating reflects WSKT’s important role to the government, strong market position in the construction sector, and its benefits as a major state-owned construction company. However, the rating is constrained by its weak liquidity and high leverage in addition to the volatile business environment in the construction sector.

The rating may be upgraded if WSKT significantly improves its leverage and debt service coverage on a sustained basis supported by strong contract backlog, providing revenue visibility over the next few years. However, the rating may be lowered if we believe that our assessment of the government’s support of WSKT weakens. Significantly weaker access to external funding, particularly with state-owned banks, may also trigger a downgrade in its rating as it will reduce WSKT’s ability to carry out its operational activit ies, hence, exposing it to project completion delays and lower profitability. Weaker access to external funding will also expose WSKT to higher liquidity and refinancing risks. The rating may also be subject to a downgrade if WSKT continuously fails to win adequate new contracts, resulting in insufficient revenue visibility. (ends)