JAKARTA (TheInsiderStories) – Fitch Ratings has assigned a final rating of ‘BBB’ to the Samurai bonds issued by Indonesian government. On July 2, the country has released JPY50.7 billion with coupon rate 1.13 percent due to 2023, JPY24.3 billion with coupon 1.35 percent mature 2025, JPY10.1 billion with rate 1.48 percent due 2027, JPY13.4 billion with coupon 1.59 percent mature 2030, and JPY1.5 billion with rate 1.80 percent and due 2040.
This replaces the expected rating of ‘BBB (EXP)’ that the agency assigned on July 2, 2020. The final ratings are in line with Indonesia’ Long-Term Foreign-Currency Issuer Default Rating (IDR) of ‘BBB’ with a Stable Outlook. Fitch affirmed Indonesia’ Long-Term Foreign- and Local-Currency IDRs in January 2020.
It said, the ratings on the newly issued bonds are sensitive to any changes in Indonesia’s Long-Term Foreign-Currency IDR. The following were the rating sensitivities for the sovereign rating published in the rating action commentary in January 2020.
The Factors that could, individually or collectively, lead to positive rating action or upgrade, said Fitch, are reduction in external vulnerabilities, for instance, through a sustained increase in foreign-exchange reserves, reduced dependence on portfolio flows or lower exposure to commodity price volatility.
An improvement in the government revenue ratio, for example, from better tax compliance or a broader tax base, which would strengthen public finance flexibility. Continued improvement of structural indicators, such as governance standards, closer in line with those of ‘BBB’ category peers.
Factors that could individually or collectively lead to negative rating action or downgrade a sustained decline in foreign exchange reserve buffers, resulting from a sharp external shock to investor confidence. A rapid increase in the overall public debt burden, for example, resulting from budget deficits well exceeding the current 3 percent ceiling or accumulation of the debt of publicly owned entities.
A weakening of the policy framework that could undermine macroeconomic stability. In addition, said the agency, International scale credit ratings of sovereigns, public finance and infrastructure issuers have a best-case rating upgrade scenario of three notches over a three-year rating horizon and a worst-case rating downgrade scenario of three notches over three years.
The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from ‘AAA’ to ‘D’. Best- and worst-case scenario credit ratings are based on historical performance.
In early July, the Indonesian government issued Samurai Bonds worth JPY100 billion. The joint lead arrangers in this transaction are Daiwa Securities Co. Ltd., Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Nomura Securities Co., Ltd., and SMBC Nikko Securities Inc.
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