Pefindo: “idAAA(sf)” rating for PT Marga Lingkar Jakarta’s bonds

PEFINDO has affirmed its “idAAA(sf)” rating of PT Marga Lingkar Jakarta (MLJK)’s Bond I Year 2017. The bonds were issued in five tranches with different maturity dates: 2020 (IDR200 billion), 2022 (IDR217 billion), 2024 (IDR299 billion), 2027 (IDR320 billion), and 2029 (IDR464 billion). Since May 2020, MLJK has fully reserved the fund for IDR200 billion bond repayment due on November 8, 2020.

It was reflected in its restricted fund of IDR325.4 billion as of June 30, 2020, which was reserved for the maturing bonds and the next 12 month interest payment. As of June 30, 2020, it also had IDR164.0 billion cash and cash equivalent.

A debt security rated idAAA has the highest rating assigned by PEFINDO. The obligor’s capacity to meet its long-term financial commitments on the debt security, relative to that of other Indonesian obligors, is superior.

The rating suffix (sf) means the rating is for a structured-finance transaction.

The rating reflects the strong transaction structures of the project bond, the project’s good economy of service area as a part of the Jakarta Outer Ring Road’s (JORR) toll road, and good operating management. The rating is constrained by exposure to toll road traffic volume volatility and high financial leverage.

The rating may be lowered if MLJK’s debt service coverage ratio, as calculated by EBITDA and beginning cash including restricted cash divided by interest payment and bond repayment during the year, is less than 2x every year-end on a sustained basis. This may be triggered by a significant drop in EBITDA due to a combination of a decrease in JORR’s traffic volume or slower than expected traffic volume recovery, lower or longer than expected toll fee adjustment projected by the end of September 2020, and/or higher costs than estimated. We could also lower the rating if it fails to meet the required transaction structures. Although the debt service coverage ratio may potentially be slightly below 2x in the near to medium term, we still maintain the rating as we view that the potential ratio below 2x is projected to be a one-time event after the second repayment of the bond. However, we will closely monitor its performance in the near term, particularly if the Coronavirus (COVID-19) pandemic prolongs resulting in another large scale social restriction and further decrease of JORR’s traffic volume. Although there is still uncertainty when the pandemic will subside, MLJK’s revenue, which dropped 22.7% year on year in the first half of 2020 (1H2020), has gradually increased since May 2020.

MLJK operates the 7.67-kilometer (km) JORR W2 North toll road for the Ulujami-Kebon Jeruk section, under a concession agreement with the Indonesian Toll Road Authority, which terminates at end of 2044. The JORR W2 North toll road has been in operation since July 2014, so there is no construction risk. Established in 2009, it is a subsidiary of PT Jasa Marga (Persero) Tbk (JSMR, idAA-/Stable), which is the leading toll road operator in Indonesia with 42 years of experience since its establishment in 1978. At the end of June 2020, its shareholders were PT Jasa Marga (Persero) Tbk (65%) and PT Jakarta Marga Jaya (35%). (ends)