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Rating Action:

Moody's assigns Ba3 to Bumi Serpong Damai's proposed notes

13 Mar 2018

Singapore, March 13, 2018 -- Moody's Investors Service has assigned a backed senior unsecured rating of Ba3 to the proposed senior unsecured notes to be issued by Global Prime Capital Pte. Ltd. The proposed notes are guaranteed by Bumi Serpong Damai TBK (P.T.) (BSD, Ba3 positive) and some of its subsidiaries and rank pari passu with the 2020 notes and 2023 notes.

The rating outlook is positive.

BSD will use the net proceeds from the proposed issuance for the repayment of outstanding borrowings, capital spending and other working capital purposes.

RATINGS RATIONALE

"The proposed notes are not exposed to either legal or structural subordination risk. Hence the rating is in line with BSD's Ba3 corporate family rating," says Jacintha Poh, a Moody's Vice President and Senior Analyst.

At 31 December 2017, 84% of BSD's total debt was unsecured. Also, majority of BSD's earnings and borrowings are at the holding company, which is a guarantor to the notes.

"The increase in borrowings from the proposed notes can be accommodated in BSD's Ba3 corporate family rating and positive outlook," adds Poh, who is also Lead Analyst for BSD.

Moody's expects BSD's credit metrics will stay strong over the next 12-18 months with adjusted debt/homebuilding EBITDA at around 2.5x and homebuilding EBIT/interest expense at around 5.0x. These credit metrics will be supportive of a ratings upgrade.

BSD's Ba3 rating reflects its established position as one of the largest property developers in Indonesia, with diversification across multiple property segments -- residential, office, retail, industrial and hospitality.

The company's focus on selling land lots and low-rise commercial and residential properties entails relatively low development risks and provides it with the flexibility to scale operations in line with demand.

Nonetheless, BSD remains exposed to: (1) concentration risk as it derives the majority of its revenue from BSD City; (2) the volatile property sector in Indonesia; and (3) the evolving regulatory environment in Indonesia.

The outlook on BSD's rating is positive reflecting Moody's expectation that the company will retain its strong financial metrics over the next 12-18 months, which could support an upgrade of its ratings.

BSD's rating could be upgraded over the next 12-18 months if the company successfully executes its business plans and grows revenue towards IDR10 trillion while maintaining healthy financial metrics and strong liquidity.

Credit metrics that would support an upgrade include adjusted debt/homebuilding EBITDA below 2.5x, and adjusted homebuilding EBIT/interest coverage above 5.0x. An upgrade will also require that the recurring EBIT to cover at least 1.0x of interest expense.

Given the positive outlook, BSD's rating is unlikely to be downgraded over the next 12-18 months. However, the outlook could return to stable if: (1) the company fails to implement its business plans; (2) there is a deterioration in the property market, leading to weakness in its operations such that adjusted debt/homebuilding EBITDA stays above 2.5x and adjusted homebuilding EBIT/interest coverage falls below 5.0x.

The rating will face downward pressure if there are signs of cash leaking from BSD to fund affiliated companies, for example, through intercompany loans, aggressive cash dividends, or investments in affiliates.

The principal methodology used in this rating was Homebuilding And Property Development Industry published in January 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Established in 1984, Bumi Serpong Damai TBK (P.T.) (BSD) is the largest developer listed on the Indonesia Stock Exchange by market capitalization. The company and its subsidiaries are engaged in the development, management and operation of residential townships, condominium towers, office buildings, retail malls and hotel properties. The company is sponsored by Sinarmas Land Limited, which held a 58% interest in BSD at 31 December 2017.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

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Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

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Jacintha Poh
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
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