Singapore, July 27, 2018 -- Moody's Investors Service has assigned a first-time B2 corporate
family rating (CFR) to Intiland Development Tbk (P.T.).
At the same time, Moody's has assigned a B2 senior unsecured
rating to the company's proposed US dollar bond issuance.
The proposed bonds are unconditionally and irrevocably guaranteed by Intiland's
major operating subsidiaries.
The outlook on the rating is stable.
The bond proceeds will be used mainly for the refinancing of existing
short-term borrowings and general corporate purposes.
RATINGS RATIONALE
"Intiland's B2 CFR reflects its established market position
and ownership of a diversified asset portfolio, comprising high-rise
apartments, houses, commercial properties and industrial estates,
all of which are well located across Jakarta, Greater Jakarta,
Surabaya and Greater Surabaya," says Jacintha Poh, a
Moody's Vice President and Senior Analyst.
The CFR also considers Intiland's joint ventures with reputable
partners such as GIC Private Limited, a sovereign wealth fund established
by the Government of Singapore (Aaa stable). Such joint ventures
mitigate development and funding risk, while supporting growth.
"In addition, the B2 CFR takes into account the likely improvement
in Intiland's financial metrics and liquidity over the next 12-18
months, as the company starts to recognize revenue from sales contracted
in previous years and replaces its short-term borrowings with longer
tenor debt," adds Poh, who is also Moody's Lead
Analyst for Intiland.
Intiland is an established property developer with an operating history
of 35 years. The company has successfully developed more than 60
projects in Jakarta and Surabaya.
Intiland had a sizable land bank of around 2,052 hectares at 31
March 2018, a portion of which was located in the prime areas of
Jakarta and Surabaya. Its land bank is sufficient to support more
than 10 years of development.
Intiland also generates a healthy recurring income — which accounted
for around 23% of its total revenue in Q1 2018 — from the
leasing of its commercial properties. Moody's estimates that
Intiland's recurring cash flow can cover around 0.4x of interest
paid over the next 12-18 months, which is higher than the
around 0.2x coverage of other similarly-rated Indonesian
property developers.
Intiland's target is to achieve total marketing sales of IDR3.3
trillion in 2018. In the first half of 2018, the company
achieved marketing sales of around IDR1.3 trillion, of which,
IDR693 billion related to the sales of 57 Promenade, which were
committed in 2017 but only processed in 2018.The company expects
marketing sales to improve, with new project launches in September/October
this year.
Moody's expects Intiland's financial metrics will improve
over the next 12-18 months, with adjusted debt/homebuilding
EBITDA at around 5.5x in 2018 and 5.1x in 2019, and
homebuilding EBIT/interest expense at around 1.7x in 2018 and 2.0x
in 2019. For the 12 months ended 31 March 2018, the company's
adjusted debt/homebuilding EBITDA registered 5.2x and homebuilding
EBIT/interest expense 1.8x.
The improvement in the Intiland's financial metrics is largely driven
by its stronger revenue generation. Moody's estimates around
40%-45% of the company's revenue over the next
12-18 months will be contributed by marketing sales achieved in
previous years.
Intiland's liquidity is weak, owing to its reliance on short-term
funding. However, Moody's expects liquidity to improve
over the next six months, because the company will be replacing
its short-term debt either with the proposed US dollar bond or
a syndicated loan, both of which show longer tenors.
As of 31 March 2018, Intiland had cash and cash equivalents of IDR878
billion, which were insufficient to cover IDR2.7 trillion
of debt coming due over the next 12 months. The short-term
borrowing consisted largely of secured bank loans, which the company
has a track record of rolling over. Intiland also had IDR925 billion
of committed facilities.
Intiland's proposed US dollar bond is rated in line with its B2
CFR, because bondholders are not exposed to either legal or structural
subordination risk. Pro-forma the US dollar bond issuance,
around 60% of the company's total debt will be unsecured.
Furthermore, the proposed bond will be guaranteed by all major subsidiaries.
The ratings outlook is stable, reflecting Moody's expectation that
Intiland will successfully execute its business plans and meet its marketing
sales targets, which will support an improvement in the company's
financial metrics to within the threshold of its B2 ratings over the next
12-18 months. The stable outlook also incorporates Moody's
expectation that the company will continue to successfully roll over its
short-term borrowings.
Moody's will unlikely upgrade Intiland's ratings over the
next 12-18 months, given the company's weak financial
and liquidity profile. However, in the longer term,
positive cash-flow generation used towards deleveraging and maintenance
of solid liquidity in the form of cash balances and committed facilities
will be positive for the ratings.
Credit metrics that will support a ratings upgrade include adjusted debt/homebuilding
EBITDA below 3.5x and adjusted homebuilding EBIT/interest coverage
above 3.0x on a sustained basis.
Intiland's ratings could be downgraded if its financial and liquidity
profiles do not improve, owing to: (1) the company's
failure to execute its business plans, such that its marketing sales
fall below Moody's expectation of IDR2.5-IDR3.0
trillion over the next 12-18 months; (2) the company's
failure to materially improve its debt maturity profile by replacing short
term borrowings with medium to long term borrowings; (3) a deterioration
in the property market, leading to protracted weakness in its operations;
and (4) a material depreciation in the Indonesian rupiah, which
could increase the company's debt-servicing obligations.
The credit metrics indicative of a ratings downgrade include failure to
improve the following factors over the next 12-18 months:
(1) adjusted debt/homebuilding EBITDA, which should fall below 5.5x;
(2) adjusted homebuilding EBIT/interest expense, which should rise
above 2.0x; or (3) cash holdings and committed facilities
to cover the company's short-term debt obligations.
The principal methodology used in these ratings 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 1983, Intiland Development Tbk (P.T.)
is engaged in the development, management and operation of office
buildings, mixed-use projects, industrial estates,
condominiums and houses across Jakarta, Greater Jakarta, Surabaya
and Greater Surabaya. The company was formerly known as PT Wisma
Dharmala Sakti and listed on the Jakarta Stock Exchange in 1991.
At 30 June 2018, Intiland was around 52% owned by its founder,
Mr. Hendro Gondokusumo.
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.
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
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
