PEFINDO lowers ratings of PT Timah Tbk and its Bond to “idA”, its Sukuk to “idA(sy)”, and revises outlook to “Negative”

(June 12, 2020)--PEFINDO has lowered the ratings for PT Timah Tbk (TINS) and its Shelf-Registered Bond I to “idA” from “idA+” and the rating of its Shelf-Registered Sukuk Ijarah I to “idA(sy)” from “idA+(sy)”. The downgrade reflects our view that TINS’ financial performance has been weaker than our previous expectation as a result of lower EBITDA margin and higher debt drawdown, amidst slower global tin demand conditions affected by Coronavirus Disease (COVID-19) outbreak. We have also revised its rating outlook to “negative” from “stable” to anticipate weak EBITDA due to lower than expected tin selling price if COVID-19 prolongs and further lowers the global demand for tin. We also have a concern on the Company’s ability to repay its maturing Bond and Sukuk Series A totaled IDR600 billion, that will be matured in third quarter of 2020.

An obligor rated idA has a strong capacity to meet its long-term financial commitments relative to that of other Indonesian obligors. However, the obligor is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than higher-rated obligors.

A syariah based financing instrument rated idA(sy) indicates that the issuer’s capacity to meet its long-term financial commitments under the syariah financing contract, relative to other Indonesian issuers, is strong. However, it is somewhat more susceptible to adverse effects of changes in circumstances and economic conditions than higher-rated instruments.

The corporate rating reflects TINS position as the largest tin mining permit (IUP) holder in Indonesia, vertical integrated operations, and decreasing illegal mining practices in Indonesia. These strengths are partly offset by the threat of its moderate capital structure, adequate cash flow protection measures, and its exposure to the volatility of tin prices. The rating could be lowered if the Company’s weakened financial performance continues in the near term, particularly from cash flow protection capacity in servicing financial obligations. The rating could also be under pressure if it incurs significantly higher debt than projected without being compensated by better business performance, and if the fluctuation of global tin price significantly impairs its revenue and/or profitability. We could revise the outlook to “stable” if the Company is able to strengthen its EBITDA generation amidst unfavorable condition nowadays and improve its credit matrix to be more conservative. We will keep monitoring the COVID-19 pandemic impact on the Company’s business performance and financial profile in the near to medium term. Founded in August 1976, TINS is a vertically integrated mining company in Indonesia focused on producing tin ingots. Its main mining operations are in Pangkal Pinang, Bangka Belitung. As of December 31, 2019, its A class shares were owned by the Indonesian government, and its B class shares by PT Indonesia Asahan Alumunium (Persero) (65.0%) and the public (35.0%). (ends)