JAKARTA (TheInsiderStories) – The construction firm, PT Wijaya Karya Tbk (IDX: WIKA) plans to issue bonds and sharia bond with a total value of Rp5 trillion (US$337.84 million) to pay their obligation. The step is part of the company’ strategy in anticipating to refinances the komodo bond with worth of Rp5.4 trillion which will mature in January 2021.
The management said, the notes will be issued in stages starting the fourth quarter of 2020. According to the CEO, Budi Waskito, his office has prepared a number of strategies to further strengthen the cash flow structure.
Apart from issuing bonds, the constructor also looking a bridging loan commitment up to Rp4 trillion. Referring to the first half’ financial report, Wijaya Karya have cash and cash equivalents of Rp7.1 trillion and received the disbursement of land bailout funds from the government amounting to Rp1.1 trillion.
Due to the financial problems, recently, Fitch Ratings has downgraded the issuer Long-Term Foreign Currency and Local Currency Rating (IDR) WIKA to ‘BB-‘ from ‘BB’. At the same time, Fitch Ratings Indonesia has downgraded its National Long-Term Rating to ‘A (idn)’, from previously ‘AA- (idn)’. All ratings are placed in a Negative Rating Watch (RWN).
The downgraded, said the agency, reflects WIKA‘ performance in the second quarter which is significantly weaker their expectations, where leverage has increased by more than five times. Fitch projects that the issuer leverage will remain high in the next few years.
Fitch expects the company leverage to increase to around 14 times in 2020, compared to 2019 around 3.6 times due to the pandemic, then improve to 6.2 times in 2021. The leverage can stay at around 5.0 – 5.5 times in the medium term due to state-owned firm role in the country’ infrastructure program which will increase investment and capital expenditure in the next few years.
New contract work that is pending in the first half of 2020 will start gradually again and WIKA will accelerate construction to complete the pending work, thus increasing the completed projects in 2021. Fitch sees the constructor will remain dependent on debt to fund the associated negative free cash flow. by contract from the government.
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