JAKARTA (TheInsiderStories) – The state-owned toll road builder, PT Jasa Marga Tbk (IDX: JSMR) decided to cut this year’ capital expenditure from initial targets Rp20 trillion to Rp 17.5 trillion (US$1.19 billion). The issuer also delayed some projects as part of the company strategy to maintained the financial balance sheet due to the pandemic.
According to finance director, Donny Arsal, in the virtual public expose on Wednesday (08/26), the use of investment is prioritized for the maintenance of safety and the convenience of the toll roads owned by the company. He added, the constructor also postponed the issuing of the sharia asset backed securities and prefers to issues a commercial paper up to Rp 1 trillion.
The notes is similar to a discounted bond with a tenure of one year to enlivening the products published by Bank Indonesia. He explained that the issuance of asset back securities will be reviewed again by Jasa Marga at the end of the year. The instruments are short-term debt securities issued without collateral on the money market and issued by companies or financial institutions.
The builder is currently reviewing the issuance of a number of financial instruments to increase funding for the completion of the company projects like Islamic asset back securities with a target fund at least Rp2 trillion. For this securitization, the issuer will use the basic asset of ticket revenue from the Jakarta Outer Ring Road Cilincing – Cikunir in the capital city.
Jasa Marga is also reviewing to re-issue the DINFRA (also asset back securities) by using the underlying one of the Trans Java toll roads. In addition, the company is also reviewing the issuance of zero coupon bonds and step up coupon bonds. However, unfortunately the company still has not found a suitable pricing for publication.
Last June, the operator announced looking around Rp2 trillion from bond market to pay the its debt. This year, the operator has a number of maturing debts with total amount Rp5 trillion. Series JM-10 issued in 2010 will mature on Oct. 12, 2020 and have a principal amount of Rp1 trillion. Then, Komodo bonds listed on the London Stock Exchange since Dec. 13, 2017 will mature on Dec, 11, 2020 with worth of Rp4 trillion.
Currently, Moody’s Investor Service was downgraded Jasa Marga rating from Baa2 to Baa3 with outlook remains negative. The one-notch reduction considers the government’ increasingly selective approach towards supporting the state owned enterprises (SOEs) given its current fiscal position, and its comparatively lower strategic importance than other higher rated and more critical SOEs.
The agency expects the contraction in traffic volumes on its toll roads will weaken its cash-flow generation in 2020. Although the government has further eased social distancing measures, there is limited visibility on the subsequent recovery in Indonesian toll road volumes because of the unprecedented nature of the coronavirus outbreak.
The weaknesses in Jasa Marga’ financial profile have left it vulnerable to demand shifts under the current operating conditions. The company’ credit profile is reliant on prospective traffic growth for its toll roads in development or ramping up to strengthen its financial profile to pre-coronavirus levels.
Although it is seeking to reduce operating and capital expenditures in response to the pandemic, there may be limited opportunities to materially reduce capital expenditure in 2020. The toll managers is in discussions with bank lenders to re-profile bank debt servicing requirements to better align with cash flow at both the holding company and project levels during these uncertain times.
Recent regulatory actions amid the ongoing uncertainties associated with the coronavirus outbreak are also credit negative for Jasa Marga. Tariff adjustments for a number of its toll roads have been postponed. While the company is eligible for compensation for this delay, uncertainty remains around the form, amount and timing of the compensation.
The toll road producer is currently 70 percent owned by the government and become a public company in 2007. As of December 2019, the company operated 1,168 kilometers (km) of toll roads across various parts of Indonesia, or 55 percent of all toll roads by length in operation.
In terms of total toll road concessions, it has the right to build, own and operate around 1,527 km of toll roads in total. The Indonesian Toll Road Authority is the regulator for the industry and the concession counter party for Jasa Marga.
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