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

(August 4, 2021)--PEFINDO has affirmed its “idAAA(sf)” rating for PT Marga Lingkar Jakarta (MLJK)’s Bond I Year 2017. The bonds were issued in five tranches with different maturity dates: 2020 (IDR200 billion, which has already been fully repaid), 2022 (IDR217 billion), 2024 (IDR299 billion), 2027 (IDR320 billion), and 2029 (IDR464 billion). As of June 30, 2021, MLJK had restricted funds of IDR231.04 billion, which was reserved for the next 12 month interest payments of IDR110.5 billion, 12 months principal bond reserves of IDR108.5 billion for the next bond repayment of IDR217 billion due on November 8 2022 and IDR12 billion maintenance reserves. As of June 30, 2021, it also had IDR129.8 billion in cash and cash equivalents, which may support liquidity in the near term when the toll revenue is lower than expected due to lower traffic volume during the public activity restriction.

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 those 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 structure of the project bond, the project’s good economy of service area as 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 payments and bond repayments 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, and/or higher costs than estimated. We may also lower the rating if it fails to meet the required transaction structure. Although the debt service coverage ratio may potentially be slightly below 2x in the near to medium term, we maintain the rating as we are of the view that the potential ratio below 2x is projected to be after the second repayment of the bond. We will closely monitor its performance in the near term, particularly if the public activity restriction prolongs and results in a significant decrease in JORR traffic volume on a sustained basis.

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 toll road has been in operation since July 2014, so there is no construction risk. Established in 2009, MLJK is a subsidiary of PT Jasa Marga (Persero) Tbk (JSMR, idAA-/Stable), the leading toll road operator in Indonesia with 43 years of experience since its establishment in 1978. At the end of June 2021, its shareholders were PT Jasa Marga (Persero) Tbk (51%) and PT Jakarta Marga Jaya (49%), which has been bought by PT Astra Tol Nusantara since November 2020. (ends)