Singapore (TheInsiderStories) – Moody’s Investors Service has downgraded the corporate family rating of PT Agung Podomoro Land Tbk (IDX: APLN) to B2 from B1. At the same time, the rater has downgraded the backed senior unsecured rating of the 2024 notes issued by APL Realty Holdings Pte. Ltd., a wholly owned subsidiary of the property developer firm to B2 from B1.
The notes are guaranteed by Agung Podomoro Land and some of its subsidiaries. The outlook on all ratings was changed to ratings under review for downgrade from negative.
“The review for downgrade reflects uncertainties around Agung Podomoro Land’ ability to refinance its debt maturities over the next 12 months, and the company’ lack of financial flexibility, given that the majority of its investment properties, including hotels, are encumbered,” says Jacintha Poh, a Moody’s Vice President and Senior Credit Officer.
She added, the downgrade reflects Agung Podomoro Land‘ weak financial management and our expectation that the company’s operating performance is unlikely to improve in 2019. The company’ credit metrics will therefore likely remain weaker than the thresholds set for a B1 ratings level.
The developer obtained a term loan facility in May 2019 to address
the maturity of its outstanding Rp1.3 trillion (US$92.86 million) bonds over the next 12 months. The company has used part of the loan facility to refinance its Rp750 billion bond that matured on June 6, 2019.
However, Moody’s understands that the availability of funds to refinance the remaining Rp550 billion bonds (Rp491 billion due in December 2019 and Rp99 billion due in March 2020) is now uncertain. The APLN’ refinancing risk is exacerbated by the maturity of its Rp1.3 trillion syndicated loan facility. Agung Podomoro Land is unable, at this point, to share concrete refinancing plans.
Moody’s expects the public listed company’ credit metrics will remain weak over the next 12-18 months, with adjusted debt/homebuilding EBITDA at more than 5.0x and homebuilding EBIT/interest expense at less than 1.5x, because the company is unlikely to achieve around Rp3 trillion of core marketing sales in 2019 and 2020 and conclude the Rp2.5 trillion of industrial land sale at its Podomoro Industrial Park in Karawang, Greater Jakarta.
Agung Podomoro Land plans to sell one of its investment properties in the second half of 2019, and use part of the proceeds to reduce debt. However, the sale is subject to delays and will not support a sustained improvement in the company’s credit metrics.
With respect to Environmental, Social and Governance risks, Moody’s has considered the developer’ weak financial management. The company also has concentrated ownership by its founder and his family, but this risk is partially mitigated by the oversight exercised through independent board directors.
Moody’s review will focus on the company’ ability to provide a clear and concrete refinancing plan for upcoming maturities over the next 12-18 months. The lack of such a plan could lead Moody’s to further downgrade the ratings over the next one to two months.
Agung Podomoro Land is an integrated property developer. It
listed on the Indonesia Stock Exchange in 2010. The company and its subsidiaries are engaged in the development, management and operation of apartments, houses, shopping centers, office towers and hotel properties. Its controlled by Trihatma Kusuma Haliman, with an around 8o percent stake in the company at end of March, 2019.
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