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

(September 23, 2021)--PEFINDO has assigned “idAAA(gg)” rating to PT Waskita Karya (Persero) Tbk (WSKT)’s proposed bond amounting to IDR1,773 billion.

IDR112 billion of the proposed bond 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 refinance WSKT’s bonds due in September 2021, as well as for working capital. At the same time, we have also affirmed the rating for WSKT and its shelf-registered bonds II, shelf-registered bonds III, and shelf-registered bonds IV at “idBBB”. The outlook for the corporate rating is “stable”.

An obligor rated idBBB has an adequate capacity to meet its long-term financial commitments relative to that of other Indonesian obligors. However, adverse economic conditions or changing circumstances are more likely to weaken its capacity to meet its financial 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 (gg) in a particular rating incorporates security in the form of government guarantee.

The 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 stateowned banks, may also trigger a downgrade in its rating as it will reduce WSKT’s ability to carry out its operational activities, 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.

WSKT engages mainly in providing construction works with a contribution of 90% of its revenue in 2020. Its other businesses include precast concrete, toll roads, property, and energy. It has an extensive domestic marketing network with 33 marketing offices throughout the country. The Indonesian government held a 66% stake in WSKT as of March 31, 2021, with the remainder being publicly owned. (ends)