PEFINDO: PT Hutama Karya (Persero) rated “idAA-”

(May 19, 2022)--PEFINDO has raised the ratings for PT Hutama Karya (Persero) (PTHK) and its Shelf-Registered (SR) bond II and SR Sukuk I to “idAA-” from “idA”. The rating action reflects our view on the stronger degree of support from the government that PTHK will continue to benefit, considering PTHK’s very important role and strong link with the government, which, based on past actions, we believe may support PTHK during times of stress. The Trans-Sumatra toll road, developed by PTHK, is critical to improve connectivity and accelerate economic development in Sumatra, which we believe is integral to the country’s economy as it is resource rich. The government has provided PTHK with IDR25 trillion of capital injections in 2021 for the construction of the Trans-Sumatra toll road, summing the state injection to IDR52.3 trillion since 2015. As of end of December 2021, about 88% of PTHK’s debt were guaranteed by the government, which is also indicating its very strong willingness in supporting PTHK. At the same time, PEFINDO has also affirmed its “idAAA(gg)” rating for PTHK’s SR Bond I, which is fully guaranteed by the government of Indonesia. The outlook for the corporate rating is “stable”.

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 its category. The suffix (sy) denotes the rating mandates compliance with Islamic principles.

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 those of other Indonesian issuers, is superior. The suffix (gg) in a particular rating incorporates security in the form of a government guarantee.

The rating reflects PTHK’s very important role to the government in providing Trans-Sumatra toll road, its satisfactory market position in the construction industry as a benefit of being a state-contractor, and high order book from Trans-Sumatra toll road project. The rating is constrained by its aggressive financial profile and the relatively volatile construction business environment. The rating may be raised if we believe that there is stronger linkage between PTHK with the government based on our government- related entities rating methodology. The rating may be lowered in the event of a significant decrease in government ownership and/or support.

PTHK, established in 1961, is a state-owned construction company specializing in roads and bridges with business interests in investment and manufacturing. Through presidential decree PTHK was appointed to be the sole developer and operator of the Trans-Sumatra toll road. It also operates the south section of the Jakarta outer ring road (JORR-S) and Tanjung Priok access (ATP) toll roads.

Through its three subsidiaries, PTHK also engages in the property sector, as well as manufacturing and services to support th e Trans-Sumatra project. As of December 31, 2021, it was wholly owned by the Indonesian government. (ends)