Singapore, January 20, 2020 -- 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 stable) and some
of its subsidiaries, and rank pari passu with the 2021 and 2023
notes.
The rating outlook is stable.
BSD will use some of the net proceeds from the proposed issuance to repay
existing indebtedness and the remaining for working capital and other
general corporate purposes.
RATINGS RATIONALE
"The proposed notes are not exposed to either legal or structural subordination
risk," says Jacintha Poh, a Moody's Vice President and
Senior Credit Officer. "The rating is therefore aligned with
BSD's Ba3 corporate family rating."
At 30 September 2019, around 62% of BSD's total debt was
unsecured. Moody's points out that the majority of BSD's
earnings and borrowings are held at the holding company, which is
a guarantor to the notes.
"We view BSD's use of the net proceeds from the proposed notes to refinance
its 2021 notes as credit positive, because the new issuance will
extend its weighted-average debt maturity," adds Poh,
who is also Moody's Lead Analyst for BSD.
Moody's expects that BSD's credit metrics will remain within the thresholds
for its Ba3 rating over the next 12-18 months, with adjusted
debt/homebuilding EBITDA at around 3.5x and homebuilding EBIT/interest
expense at around 3.1x.
Moody's also expects BSD's liquidity to remain very good over
the next 12-18 months, supported by the company's large
cash holdings. At 30 September 2019, BSD had cash and cash
equivalents of IDR6.9 trillion. Moody's expects the
company to generate around IDR1.8 trillion of operating cash flow
from 30 September 2019 through to 31 December 2020, which will be
sufficient to cover (1) projected dividend payout of around IDR200 billion,
(2) maturing debt obligations of around IDR600 billion; and (2) projected
capital spending of around IDR2.5 trillion.
BSD's Ba3 rating reflects its established position as one of the largest
property developers in Indonesia, with diversification across multiple
projects and property segments. BSD's scale and diversification
also provide the company with the flexibility to alter its product offerings
and cater to changing market demand.
The rating incorporates BSD's focus on the sale of land lots and the development
of low-rise commercial and residential properties, which
entail lower development risks and support its strong gross margins.
BSD's rating is constrained by the company's (1) small scale when compared
with its global industry peers, (2) complex corporate structure,
and (3) concentration in the Greater Jakarta region. The company
is also exposed to the volatile property sector and the evolving regulatory
environment in Indonesia.
With respect to Environmental, Social and Governance risks,
Moody's has considered the founding family's concentrated ownership of
BSD, through Sinarmas Land Limited and its board composition that
only has two independent commissioners out of a five-member board.
However, the company's strong execution track record,
healthy credit metrics along with robust liquidity partially mitigates
any potential governance risks.
The stable rating outlook reflects Moody's expectation that BSD will achieve
at least IDR5 trillion of marketing sales each year and maintain financial
discipline as it pursues growth.
An upgrade of BSD's rating is unlikely over the next 12-18 months,
but upward momentum could emerge, if the company successfully executes
its business plans while maintaining healthy credit metrics and good liquidity.
Credit metrics that would support an upgrade include adjusted debt/homebuilding
EBITDA below 2.5x, and adjusted homebuilding EBIT/interest
expense above 5.0x. An upgrade will also require that the
recurring cash flow to cover at least 1.0x of interest expense.
Moody's could downgrade BSD's ratings if (1) the company fails to implement
its business plans; (2) there is a deterioration in the property
market, leading to protracted weakness in the company's operations
and credit quality; or (3) there is evidence of cash leaking from
BSD to fund affiliated companies, for example, through intercompany
loans, aggressive cash dividends or investments in affiliates.
Metrics indicative of a potential downgrade include (1) adjusted debt/homebuilding
EBITDA above 4.0x; and (2) adjusted homebuilding EBIT/interest
expense below 3.0x on a sustained basis.
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 an approximate 60% stake in BSD
at 30 September 2019.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Jacintha Poh
VP - Senior Credit Officer
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
