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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

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Rating Action:

Moody's confirms Agung Podomoro Land's B2 rating; outlook negative

30 Sep 2019

Singapore, September 30, 2019 -- Moody's Investors Service ("Moody's") has confirmed the B2 corporate family rating (CFR) of Agung Podomoro Land Tbk (P.T.) ("Agung Podomoro Land").

At the same time, Moody's has confirmed the B2 backed senior unsecured rating of the 2024 notes issued by APL Realty Holdings Pte. Ltd., a wholly owned subsidiary of Agung Podomoro Land. The notes are guaranteed by Agung Podomoro Land and some of its subsidiaries.

The outlook on all ratings is negative.

These rating actions conclude the review for downgrade initiated on 15 July 2019.

RATINGS RATIONALE

On 26 September 2019, Agung Podomoro Land announced that it has received IDR800 billion ($57 million) of advances from its controlling shareholder, Trihatma Kusuma Haliman and family, which will be converted into equity after obtaining approval at the company's extraordinary general meeting in November 2019.

At the same time, Agung Podomoro Land has signed a $127 million senior secured term facility agreement with Credit Opportunities II Pte. Limited (managed by SSG Capital Management) that has a tenor of 18 months and will be secured by Central Park Mall.

The company will use the funds raised to repay its (1) outstanding IDR1.178 trillion syndicated facilities due 30 September 2019; (2) IDR451 billion domestic bond due 19 December 2019; (3) IDR99 billion domestic bond due 25 March 2020; and (4) IDR750 billion syndicated facilities due 24 May 2021.

"The confirmation of Agung Podomoro Land's B2 CFR reflects that the company has been able to arrange funds to address its significant refinancing requirements over the next six months," says Jacintha Poh, a Moody's Vice President and Senior Credit Officer.

"The negative outlook reflects our expectation that Agung Podomoro Land's liquidity will weaken over the next 12-18 months and that the company will face refinancing risk, because its new secured term facility will come due by March 2021," adds Poh.

Agung Podomoro Land's B2 CFR also reflects the company's established market position and portfolio of investment properties that provides a healthy recurring income base. For the 12 months ended 30 June 2019, the company's recurring revenue accounted for 33% of total revenue, at around IDR1.5 trillion. Moody's estimates the recurring cash flow covered around 0.8x of interest expense.

Over the next 12-18 months, Moody's expects the company's recurring revenue to grow by around 10%, largely driven by the opening of a new retail mall in Medan and hotels in Bandung. Moody's estimates the recurring cash flow coverage of interest expense will also remain around 0.8x.

In the first eight months of 2019, Agung Podomoro Land achieved around IDR1.3 trillion of core marketing sales, equivalent to 43% of its IDR3.2 trillion full-year target. Despite the good pick-up in July and August, Moody's estimates the company will likely achieve core marketing sales of only around IDR2 trillion in 2019. Consequently, Agung Podomoro Land's credit metrics will remain weak, with adjusted debt/homebuilding EBITDA at around 5.0x and homebuilding EBIT/interest expense below 2.0x.

Agung Podomoro Land plans to sell one of its investment properties in the second half of 2019 and use part of the proceeds to reduce debt, in turn supporting an improvement in liquidity and credit metrics. However, the sale may be subject to delays.

In terms of environmental, social and governance (ESG) factors, Moody's has considered Agung Podomoro Land's weak financial management. The company's ownership is also concentrated in its founder and his family, but this risk is partially mitigated by the oversight exercised through independent board directors. Furthermore, the founder has shown support for the company by injecting funds in times of stress.

Given the negative ratings outlook, an upgrade is unlikely over the next 12-18 months. Nonetheless, the outlook could return to stable if the company (1) improves its liquidity such that cash balances and committed facilities are sufficient to cover operating cash needs and debt repayments over the next 12-18 months; and (2) successfully executes its business plans, leading to a sustained improvement in its credit metrics, with adjusted debt/homebuilding EBITDA falling below 5.0x and adjusted homebuilding EBIT/interest expense rising above 2.0x.

Moody's could downgrade the ratings if Agung Podomoro Land's credit metrics and liquidity weaken, owing to (1) a deterioration in the property market, leading to protracted weakness in the company's operations; and (2) a material depreciation in the Indonesian rupiah, which could increase the company's debt servicing obligations.

Metrics indicative of a downgrade include (1) adjusted debt/homebuilding EBITDA exceeding 5.0x; (2) adjusted homebuilding EBIT/interest coverage falling below 2.0x; or (3) insufficient cash balances and committed facilities to cover operating cash needs and debt repayments over a 6-12 month period.

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.

Agung Podomoro Land Tbk (P.T.) is an integrated property developer, and listed on the Indonesia Stock Exchange in 2010. The company and its subsidiaries are engaged in the development, management and operation of apartments, houses, shopping centers, office towers and hotel properties. It is controlled by Mr. Trihatma Kusuma Haliman and family, who held an approximate 84% stake in the company at 30 June 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

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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