PEFINDO: PT Waskita Toll Road rating affirmed at “idBBB-”, outlook revised to negative

(February 21, 2022)--PEFINDO has affirmed its “idBBB-” rating for PT Waskita Toll Road (WSTR). However, we revised the outlook to “negative” from “stable”, following the revision on the credit rating outlook of its parent, PT Waskita Karya (Persero) Tbk. (WSKT, idBBB-/Negative), to “negative” from “stable”, reflecting heightening refinancing risks from WSKT’s upcoming bond maturities in May and October totaling IDR2.1 trillion. Originally, WSKT plans to refinance all of its bond maturities in 2022 using proceeds from its corporate action plans but we come to understand that these plans are still under process which has led to delays in its completion such that it is outside the expected timeline. The outlook also reflects the execution risk on the WSKT’s corporate action plans as it is contingent on market's appetite and conditions, which could become more challenging for WSKT following the recent default of PT Waskita Beton Precast Tbk (WSBP), one of its subsidiaries, as a result of the court’s decision to put WSBP in the temporary Suspension of Debt Payment Obligations (PKPU. WSTR is considered as a core subsidiary of WSKT and therefore any changes in the parent’s corporate rating and/or outlook will be mirrored to WSTR.

An obligor rated idBBB has an adequate capacity to meet its long-term financial commitments relative to those of other Indonesian obligors. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments. The Minus (-) sign indicates that the rating is relatively weak within the respective rating category.

The rating reflects very strong likelihood of support from its parent, and good prospects for toll road projects. However, the rating is constrained by the Company’s aggressive capital structure and weak cashflow protection, high dependence on asset divestment to finance business expansion, and business risk related to the development of new toll roads.

The rating may be lowered if WSKT’s rating is lowered, or if we view a significant decline in the parent’s support, ownership. The rating may also be under pressure if it fails to divest the Company’s toll road assets as planned and followed by incurring higher-than-expected debt, weakening its capital structure and cash flow protection indicators, or if WSTR fails to complete the toll road construction of its majority-owned subsidiaries, which may further delay the cash inflow from the toll road revenue and divestment pipelines. The outlook may be revised to stable if WSKT’s outlook revises to stable.

Engaged in the toll road industry, PT Waskita Toll Road held shares on 12 toll road concessions as of September 30, 2021, with the shareholders consisting of WSKT (87.5%), PT Taspen (Persero) (7.9%), and PT Sarana Multi Infrastruktur (Persero) (4.5%). (ends)