PEFINDO lowers the ratings of PT Jasamarga Pandaan Toll to “idA+” and its Sukuk Ijarah to “idA+(sy)”

(May 20, 2020)--PEFINDO has lowered its rating for PT Jasamarga Pandaan Tol (JPTR) to “idA+” from “idAA-” and JPTR’s Sukuk Ijarah Year 2019 to “idA+(sy)” from “idAA-(sy)”. The rating downgrade was triggered by our rating downgrade on JPTR’s parent, PT Jasa Marga (Persero) Tbk, as we view that JPTR has a very strong support from PT Jasa Marga (Persero) Tbk. The outlook of the Company’s corporate rating is “stable” as we view that JPTR has sufficient liquidity in the amount of IDR118.7 billion cash as of May 15, 2020 to cover its financial services in the near term, particularly during the Coronavirus Disease (COVID-19) pandemic, which will make JPTR’s toll revenue decline in 2020 as a result of large scale social restriction in Surabaya and Malang.

An obligor rated idA has a strong capacity to meet its long-term financial commitments relative to that of other Indonesian obligors.

However, the obligor is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than higher-rated obligors. The Plus (+) sign indicates that the rating is relatively strong within the respective rating category.

The suffix (sy) means the rating mandates compliance with Islamic principles.

The corporate rating reflects very strong support from PT Jasa Marga (Persero) Tbk (JSMR, idAA-/Stable), which provides a letter of support in case of cash deficiency for operational and financial needs related to the Sukuk Ijarah issuance, as well as a shareholder loan facility to mitigate refinancing risk during the tenor of Sukuk. The rating also reflects the good economy of the Company’s service area, and its cash basis revenue stream with strong EBITDA margin. However, the rating is constrained by JPTR’s high financial leverage and vulnerability to traffic volume volatility on a single toll road asset.

The likelihood of a rating upgrade in the near term is limited, in our view. However, the rating may be raised if there is evidence of stronger support from JSMR, such as by providing a stronger letter of guarantee with an unconditional and irrevocable clause. The rating could also be raised if JSMR’s rating is raised as result of sustained improvement in capital structure and cash flow protection measures and supported by higher-than-expected cash flow from the toll road operation as a result of regular tariff adjustments every two years and a significant and sustainable increase in traffic volume. However, the rating will be lowered if we view a reduction in support from JSMR, such as a lower commitment to support JPTR in a case of cash deficiency, revoking its shareholder loan facility and/or if JSMR’s rating is lowered. The rating could also be under pressure if the Company’s capital structure and cash flow protection measures weaken as a result of lower-than-expected revenue and/or EBITDA, due to low traffic volume with prolonged COVID-19 pandemic, a lower-thanexpected toll tariff adjustment, and/or higher costs than estimated. We could also lower the rating if the Company exceeds debt projections, as we do not expect it to incur any additional debt with no toll road development in the next five years.

Established on September 25, 1996, JPTR operates the Gempol-Pandaan toll road, comprising a 12.05-kilometer (km) Tranche I operating since June 12, 2015, and a 1.56 km Tranche II operating since May 13, 2019 when the Pandaan-Malang toll road began operating. JPTR’s concession agreement with the Indonesian Toll Road Authority runs until October 3, 2049. It is a subsidiary of JSMR, the leading toll road operator in Indonesia with 40 years of experience. In April 2019, JPTR had a right issue through the KIKDINFRA issuance resulting in the entry of a new shareholder and a reduced stake by JSMR, which has the option to gradually buy back within the next five years. At the end September 2019, its shareholders were JSMR (40%), PT Trans Optima Luhur (53.8%), and PT Jalan Tol Kabupaten Pasuruan (6.2%). (ends)