PEFINDO lowers the ratings for PT Jasa Marga (Persero) Tbk and its bond to “idAA-”

(May 13, 2020)--PEFINDO has lowered its ratings for PT Jasa Marga (Persero) Tbk (JSMR) and JSMR’s Bond XIV Series JM-10 Year 2010 to “idAA-” from “idAA”. The outlook of the corporate rating is “stable”. The rating downgrade reflects JSMR’s increasing financial leverage with projected debt to EBITDA ratio of more than 8x from additional debt of more than IDR10 trillion at subsidiaries to finance the completion of toll road projects and potential higher debt at the holding company to maintain the liquidity during Coronavirus disease (COVID-19) pandemic, while its cash flow generated is lower with delayed tariff adjustment and declining daily toll revenue since mid of March 2020 as a result of the Government’s policy of large scale social restriction in several area to mitigate the pandemic spread. We have assigned stable outlook as we view that although there is still uncertainty when the pandemic will subside, the toll road sector will have a quicker recovery compared to other transportation infrastructure sectors. We also view that JSMR’s strong financial flexibility as reflected by good relationship with banks and good track record in fulfilling financial obligations to address the refinancing risk for maturing bonds of IDR1 trillion in October 2020 and IDR4 trillion in December 2020.

An obligor rated idAA differs from the highest rated obligors only to a small degree, and has a very strong capacity to meet its long-term financial commitments relative to that of other Indonesian obligors. The Minus (-) sign indicates that the rating is relatively weak within the respective rating category.

The corporate rating reflects strong government support for completing toll road projects, JSMR’s dominant position in the toll road sector, diversified toll road portfolio with long concession period, and strong financial flexibility. The rating is constrained by its more aggressive capital structure in the near to medium term and business risks related to the development of new toll roads.

The rating will be raised if the Company improves its capital structure by deleveraging its debt, if its new toll roads are successfully operated as scheduled and consistently attract high traffic volume as projected, or if we view that there is a stronger government support.

The rating will be lowered if the restriction is prolonged to the second half of the year resulting in significantly lower toll revenue than anticipated, if it fails to obtain additional loan facility to address the refinancing risk, or if its more aggressive capital structure is not compensated by improving business performance, which could weaken its cash flow protection measures.

JSMR is the largest toll road operator in Indonesia. Its portfolio includes 13 old toll road concessions (Jagorawi, Jakarta-Tangerang, Ulujami-Pondok Aren, Jakarta Inner Ring Road (Cawang-Tomang-Pluit), Prof. Dr. Sedyatmo, Jakarta-Cikampek, Jakarta Outer Ring Road/JORR, Cikampek-Padalarang, Padaleunyi, Palikanci, Semarang, Surabaya-Gempol, and Belmera), 12 fully operated toll roads at subsidiaries (Nusa Dua-Ngurah Rai-Benoa, JORR W2N, Surabaya-Mojokerto, Solo-Ngawi, Semarang-Solo, Gempol-Pasuruan, BatangSemarang, Medan-Kualanamu-Tebing Tinggi, Gempol-Pandaan, Kunciran-Serpong, Jakarta-Cikampek II Elevated, and Pandaan-Malang), and 3 partially operated toll roads (Bogor Ring Road, Ngawi-Kertosono-Kediri, and Balikpapan-Samarinda). It is also in the process of land acquisition and construction on 5 toll road projects at subsidiaries (Cengkareng-Kunciran, Serpong-Cinere, Jakarta-Cikampek II South, Manado-Bitung, and Probolinggo-Banyuwangi). As of December 31, 2019, its shareholders were the Indonesian government (70.0%), BPJS Ketenagakerjaan (3.4%), PT Taspen (2.2%), and the public (24.4%). (ends)