Moody’s Assigns Ba3 to Bumi Serpong Damai’s Notes

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JAKARTA (TheInsiderStories) – Moody’s Investors Service has assigned a backed senior unsecured rating of Ba3 to the proposed senior unsecured notes to be issued by Global Prime Capital Pte. Ltd.

The proposed notes, the value of which is yet to be disclosed, are guaranteed by PT Bumi Serpong Damai TBK (BSDE.Jk, Ba3 positive) and some of its subsidiaries and rank pari passu with the 2020 notes and 2023 notes. The rating outlook is positive.

Bumi Serpong Damai (IDX:BSDE) will use the net proceeds from the proposed issuance for the repayment of outstanding borrowings, capital spending and other working capital purposes.

Ratings Rationale

“The proposed notes are not exposed to either legal or structural subordination risk. Hence the rating is in line with BSD’s Ba3 corporate family rating,” says Jacintha Poh, a Moody’s vice president and senior analyst.

As of Dec. 31, 2017, 84 per cent of BSD’s total debt was unsecured. Also, a majority of BSD’s earnings and borrowings are at the holding company, which is a guarantor to the notes.

“The increase in borrowings from the proposed notes can be accommodated
in BSD’s Ba3 corporate family rating and positive outlook,” adds Poh,
who is also lead analyst for BSD.

Moody’s expects BSD’s credit metrics will stay strong over the next 12-18
months with adjusted debt/homebuilding EBITDA at around 2.5x and
homebuilding EBIT/interest expense at around 5.0x. These credit metrics
will be supportive of a rating upgrade.

BSD’s Ba3 rating reflects its established position as one of the largest
property developers in Indonesia, with diversification across multiple
property segments — residential, office, retail, industrial and hospitality.

The company’s focus on selling land lots and low-rise commercial and
residential properties entail relatively low development risks and
provides it with the flexibility to scale operations in line with demand.

Nonetheless, BSD remains exposed to: (1) concentration risk as it derives
the majority of its revenue from BSD City; (2) the volatile property
the sector in Indonesia; and (3) the evolving regulatory environment in

The outlook on BSD’s rating is positive reflecting Moody’s expectation
that the company will retain its strong financial metrics over the next
12-18 months, which could support an upgrade of its ratings.

BSD’s rating could be upgraded over the next 12-18 months if the company
successfully executes its business plans and grows revenue towards IDR10
trillion while maintaining healthy financial metrics and strong liquidity.

Credit metrics that would support an upgrade include adjusted
debt/homebuilding EBITDA below 2.5x, and adjusted homebuilding
EBIT/interest coverage above 5.0x. An upgrade will also require that the
recurring EBIT to cover at least 1.0x of interest expense.

Given the positive outlook, BSD’s rating is unlikely to be downgraded
over the next 12-18 months. However, the outlook could return to stable
if: (1) the company fails to implement its business plans; (2) there is a
deterioration in the property market, leading to weakness in its
operations such that adjusted debt/homebuilding EBITDA stays above 2.5x
and adjusted homebuilding EBIT/interest coverage falls below 5.0x.

The rating will face downward pressure if there are signs of cash leaking
from BSD to fund affiliated companies, for example, through intercompany
loans, aggressive cash dividends, or investments in affiliates.

Established in 1984, PT Bumi Serpong Damai Tbk is the largest
developer listed on the Indonesia Stock Exchange by market

The company and its subsidiaries are engaged in the development, management and operation of residential townships, condominium towers, office buildings, retail malls and hotel properties. The company is sponsored by Sinarmas Land Limited, which held a 58 per cent interest in BSD.