Singapore (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 are guaranteed by PT Bumi Serpong Damai Tbk (IDX: BSDE, Ba3 stable) and some of its subsidiaries, and rank pari passu with the 2021 notes and 2023 notes.
The rating outlook is stable.
BSDE will use the net proceeds from the proposed issuance to fund the purchase of its 7.25 percent senior notes due 2021 via a tender offer and the remaining for working capital and other general corporate purposes.
“The proposed notes are not exposed to either legal or structural subordination risk, and the rating is therefore aligned with BSD’ Ba3 corporate family rating,” says Jacintha Poh, a Moody’s Vice President and Senior Credit Officer.
At 30 June 2019, around 60 percent of the property developer‘ total debt was unsecured. In addition, the majority of BSDE’ earnings and borrowings are held at the holding company, which is a guarantor to the notes.
“We view the BSDE’ proactive capital management — including its use of the majority of the net proceeds of the proposed notes to refinance its 2021 notes — as credit positive, as the new issuance will extend its weighted average debt maturity,” adds Poh.
The company‘ Ba3 rating reflects its established position as one of the largest property developers in Indonesia, with diversification across multiple projects and property segments. BSDE’ scale and diversification also provide the company with the flexibility to alter its product offerings and cater to changing market demand.
The rating incorporates Sinar Mas Group unit’ focus on the sale of land lots and the development of low-rise commercial and residential properties, which entail lower development risks and support its strong gross margins.
Bumi Serpong Damai‘ is also exposed to the volatile property sector and the evolving regulatory environment in Indonesia. The stable rating outlook reflects Moody’s expectation that the company will achieve at least Rp5 trillion of marketing sales each year and maintain financial discipline as it pursues growth.
An upgrade of BSDE’ rating is unlikely over the next 12-18 months, but upward momentum could emerge if the company successfully executes its business plans while maintaining healthy credit metrics and good liquidity.
Moody’s could downgrade the developer’ ratings if the company fails to implement its business plans, there is a deterioration in the property market, leading to protracted weakness in the company’ operations and credit quality, or there is evidence of cash leaking from BSD to fund affiliated companies, for example through inter-company loans, aggressive cash dividends or investments in affiliates.
Established in 1984, Bumi Serpong Damai is one of the largest developer listed on the Indonesia Stock Exchange by market capitalization. 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 an approximate 60 percent stake in the company at June 30, 2019.
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