JAKARTA (TheInsiderStories) – PT Indonesia Infrastructure Finance (IIF) plans to release Euro Medium Term Notes up to US$500 million, Fitch Ratings reported today. The agency gave a BBB rating with stable prospect on the proposed global bond.
The rating of the MTN program is in line with the state lender’ long-term rating, because the debt securities to be issued are a direct obligation and not guaranteed by the company. Fitch assessed that the supervision and support for IIF was very strong when viewed from the share ownership structure.
As is known, IIF is indirectly owned by the Indonesian government and sponsored by the Asian Development Bank and the International Finance Corporation. The government’ oversight the company through PT Sarana Multi Infrastruktur (SMI).
Majority funding for the financial firm’ operations comes from the shareholders through paid-in capital and loans, including subordinated loans by the creditor to the government and then distributed by the parent to IIF. The subordinated loan was given in 2011 and 2017 with a total amount of $400 million or 272 percent of IIF’ current equity.
Fitch noted, despite the pandemic, IIF posted a net profit of Rp17.5 billion until the first semester of 2020, or increased by 212.5 percent compared to the same period in 2019 of Rp5.6 billion. Asset quality was maintained with net bad credit at 0.6 percent, from last year around 0.7 percent.
Total credit increased by 23 percent, supported by the disbursement of new loans of Rp1.8 trillion. Last year, the lender also received two new commitments worth Rp1.1 trillion to finance renewable energy projects in the first semester of 2020. Fitch believes that the risk of refinancing can be mitigated by the company with access to funding in the capital market, relationships with banks, and shareholder support.
In 2020, IIF has successfully issued local bond Rp1.49 trillion to repay the company debt worth of Rp800 billion and infrastructure projects financing amounted to Rp696.67 billion. The lender also has provided loans Rp500 billion to PT Berkah Kawasan Manyar Sejahtera, a subsidiary of PT AKR Corporindo Tbk (IDX: AKRA) to develop Java Integrated Industrial and Port Estate (JIIPE) phase 2 in Gresik, East Java.
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