JAKARTA (TheInsiderStories)— Indonesia’s port operator PT Pelabuhan Indonesia III also known Pelindo III start selling its U.S dollar denominated bond to global investors. The offering is expected closed today.
Last time, the state-owned operator issued global bonds was in 2014, where the company raised $500 million. The global bond was offered with a coupon rate of 4.875 percent maturing in 10 years.
Today, Moody’s Investor Service announced has assigned Baa3 with a stable outlook to the senior unsecured bonds of up to US$1 billion. WhileStandard & Poor and Fitch have given BB and BBB- respectively to the bond with a stable outlook.
The company has appointed ANZ, Credit Suisse and Standard Chartered Bank as joint lead managers, while local house PT BNI Securities and Japan’s Mitsubishi UFJ Financial Group as co-managers.
Recently, the company’s CEO Ari Askhara has stated, the proceeds of the bonds issue is to finance the company’s existing port projects. He continued, a portion of the funds will be used for development of a port in Benoa in Bali and Mataram in Lombok island.
The company will also use a portion of the bonds proceeds to build flyover, connecting container terminal in Lamong Bay and nearby toll road. So far this year, the company has spent Rp4.68 trillion ($339.13 million) to develop its terminal and ports.
Spencer Ng, a Moody’s Vice President and Senior Analyst in a press release on Tuesday (24/04) said, the company’s rating is underpinned by its dominant position in central and eastern Indonesia, and the favorable macroeconomic conditions in the country.
At the same time, the ba1 BCA also factors in a material expansion program of up to Rp21 trillion (more than 80 percent of Pelindo III’s total assets) over the next three years, which will expose the company to execution risk and material funding requirements.
The key driver of Pelindo III’s financial metrics over the next 2-3 years is the company’s actual capital spending rate, which will, in turn, determine the size and timing of additional debt requirements.
Pelindo III has a track record of underspending its budgeted allowance for capital expenditure, which — if the same continues to occur — can result in stronger financial metrics in the near term.
Under Moody’s base case scenario, Pelindo III’s funds from operations to debt will likely weaken towards the minimum tolerance level for a Baa3 rating of 6%-8% versus 21.8% in 2017. Moody’s assessment incorporates an incremental debt requirement — including for the proposed bond — to fund the company’s expansion.
A potential downside risk to Pelindo III’s financial metrics is a further increase in trade protectionism, which could pressure its direct exports, as well as intermediate trade activities. Over the next two years, Moody’s expects that throughput volume across ports operated by the company will increase by a low- to a mid-single-digit percentage per annum, on the basis of supportive local economic conditions and an improving trade environment.
The proposed senior unsecured notes issuance is pivotal to the company’s liquidity position and successful issuance will support its liquidity profile over the next 12-18 months as the company embarks on its substantial expansion program.
Given its substantial capital expenditure program, Moody’s will unlikely upgrade Pelindo III’s ratings. Nonetheless, the company’s BCA could be raised if it maintains a solid financial profile — as measured by FFO/debt of above 10-12 percent — after incorporating additional debt requirements to fund its planned major capex program, and subject to
manageable project executions.
Pelabuhan III is Indonesia’s second largest port operator by container throughput, with 43 ports across seven provinces in central and eastern Indonesia. It handled a container throughput of 4.9 million TEUs in 2017, equivalent to about 37% of Indonesia’s entire container throughput in that year.
The company operates the Tanjung Perak port, Indonesia’s second-busiest container port, which handled 3.55 million TEUs in 2017. Currently, Tanjung Perak port contributed 72 per cent of the loading activities.
The operator currently manages at least 17 ports in central and some in eastern Indonesia. Among major ports operated by the company are Tanjung Perak port in Surabaya, East Java, Benoa and Celukan Bawang ports in Bali, Tenau in Kupang, and Banjarmasin in Kalimantan.