Fitch Ratings-Jakarta/Singapore-13 October 2014: Fitch Ratings has affirmed Indonesia-based PT Sarana Multi Infrastruktur (Persero)’s (SMI) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘BBB-‘, Short-Term Foreign Currency IDR at ‘F3’ and National Long-Term Rating at ‘AA+(idn)’. The Outlooks on the long-term ratings is Stable.
KEY RATING DRIVERS
SMI’s international ratings are credit-linked to those of the Indonesian sovereign (BBB-/F3/Stable) reflecting its status as a corporation wholly owned by the state. Fitch believes there is a high probability of extraordinary state support for SMI, if needed. SMI provides financing to investors for Public-Private Partnership (PPP) schemes. Fitch believes adequate investment in infrastructure is vital for the country to achieve economic growth targets.
SMI reports directly to the Ministry of Finance (MoF) and its board of commissioners is appointed by the government. Annual budgets, the board of directors’ remuneration, long-term plans, and board composition are approved by the MoF at the general shareholder meeting. SMI is audited by an independent public accounting firm annually, and is subject to audit by the state auditor once every three years.
SMI obtained a credit facility from PT Bank Internasional Indonesia (BBB/Stable) with a limit of IDR500bn. It is regulated to limit leverage to 10x equity, although management has said it will limit future borrowings to 3x equity. SMI has an outstanding subordinated loan to its 33.88% owned shareholding company, PT Indonesia Infrastruktur Finance (IIF), which is being drawn down in stages. The total loan of IDR2.15trn will be drawn by FY15. The loan has been provided to IIF via the government and SMI, from the Asian Development Bank (ADB) and World Bank.
SMI has focussed on increasing its financing commitment to infrastructure projects, with total loans rising to IDR5,061bn in the financial year ending December 2013 (FYE13) including the loan to IIF, from IDR1,952bn in FYE12. The main source of revenue is interest income – 92% of total revenue in FY13 (5.52% of total assets), compared with 80% in FY12 (3.51% of total assets).
Any upward or downward movements in the ratings of the Indonesia sovereign would be reflected in SMI’s ratings.
Furthermore, any negative changes to SMI’s governance, leading to a dilution of its legal status or control by the sovereign, could trigger a rating downgrade.
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Note to editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(idn)’ for National ratings in Indonesia. Specific letter grades are not therefore internationally comparable.
Additional information is available atwww.fitchratings.com.
Applicable criteria, ‘Tax-Supported Rating Criteria’, dated 14 August 2012, and ‘Rating of Public Sector Entities – Outside the United States’, dated 04 March 2014, and and “National Scale Ratings Criteria”, dated 30 October 2013, are available onwww.fitchratings.com.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
Rating of Public Sector Entities – Outside the United States – Effective from 4 March 2013 to 4 March 2014
National Scale Ratings Criteria
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