Indonesia’s Jasa Marga to Issue Two-Debt Instruments worth US$140M in 2019
The toll road and infrastructure firm, PT Jasa Marga Tbk (IDX: JSMR) targeting to operates 1,292 kilometers of toll roads by 2021 - Photo by the Company

JAKARTA (TheInsiderStories) – Toll road operator, PT Jasa Marga Tbk (IDX: JSMR) will issue local bonds with targets up to Rp2 trillion (US$136.05 million), said the issuer today (08/18). The notes have four series with three years tenure for Series A, five years for Series B, seven years for Series C, and Series D have a 10 years tenure.

The constructor has not yet determined the coupons for each series. The state-owned firm has appointed PT BNI Sekuritas, PT CIMB Niaga Sekuritas, PT Mandiri Sekuritas, and PT Trimegah Sekuritas Indonesia as joint lead underwriters for the bond issuances.

This year, Jasa Marga 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.

The initial bond offering period will take place starting today until August 28, public offering between Sept. 2 – 3 and listing around the first week of next month. The toll manager’ bonds received an AA- rating from PT Pemeringkat Efek Indonesia.

For additional information, in the first semester of 2020, Jasa Marga posted a significant decrease in net profit to Rp 105.73 billion, a 90 percent subsidence from the same period in the previous year which reached Rp1.06 trillion. The caused is hus, the company’ revenues fell 51 percent to Rp6.77 trillion from last year Rp13.83 trillion.

In details, toll road revenues fell 18 percent to Rp3.91 trillion from the same period last year worth of Rp4.74 trillion. But, non-toll revenues increased to Rp433.29 billion from previously Rp416 billion. The construction business revenue also fell 72 percent to Rp2.43 trillion from earlier Rp8.68 trillion.

Last June, Moody’s Investor Service 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.

Moody’s 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.

Its understands that these amendments to its bank loans are not aimed at avoiding default and that bank lenders have not suffered economic losses as a result of such actions. Jasa Marga continues to enjoy local bank and capital markets access, with successive drawdowns on liquidity facilities and local bonds continuing to trade near or above par value. The company is not engaged in any debt restructuring related to capital market instruments.

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.

Notwithstanding the more challenging operating environment in 2020, demand for Jasa Marga’ toll roads has historically been resilient, given continued economic growth and the favorable demographics of a growing middle class. Its liquidity in the coming 12 to 18 months is weak due to the negative cash flow impact of the coronavirus and committed capital expenditure payments.

The operator is in talks with local banks to extend expiring facilities as well as to obtain more committed liquidity facilities. In addition, the company is assessing initiatives aimed at reducing its cost base and optimizing its investment spend, with the objective of further supporting its liquidity profile.

Given the reduction in earnings stemming from the more challenging operating environment, Moody’s expects that Jasa Marga will need to provide support to some of its subsidiaries or investments with project-level debt to avoid covenant breaches for such debt. The liquidity requirements are uncertain and are dependent on the extent of traffic declines and project-level financial reserves available.

Currently, one of its subsidiaries has a pre-existing covenant breach that is technical in nature and related to the financial covenants. Banks have waived the breach for 2019, and Moody’s is awaiting documentation on the waiver for 2020 and amendment to its financial covenants, which will prevent further breaches.

Jasa Marga is currently 70 percent owned by the government since 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 (BPJT) is the regulator for the industry and the concession counter party for Jasa Marga.

US$1: Rp14,700

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