Thu, 15 Dec 1994

BPS given PBBB grade for payment capability

JAKARTA (JP): PT Pefindo, Indonesia's first credit rating agency, has awarded a PBBB+ grade for the 25-year bonds of the publicly listed Bank Papan Sejahtera (BPS)

The bonds, the seven debt instruments issued by BPS, are the first debt instruments that have been rated by Pefindo since its establishment in December, last year.

Pefindo said in a statement made available here yesterday that the triple B rating indicates that the capability of the bank to pay both interest and debt principals is adequate but that changes in the economy and the financial performance of the bank could pose higher risks.

The bonds worth Rp 250 billion (US$116 million) issued by BPS offer half-yearly coupons carrying a fixed interest rate of 16 percent for the first six month and a floating rate of 1.5 percentage points above the average interest rates offered by four major state and two private banks for the remaining period.

BPS, partly owned by the government, formerly operated as a non-bank financial institution. It changed its status into a commercial bank last year to comply with the new Banking Law.

The triple B is one of Pefindo's ratings which also include PAAA, PAA, PA, PBB, PB, PC and PD.

The triple A is given to the least risky securities instruments whereby the capability of the issuing firm in paying both the interest and debt principle is very high. The change in the economy, business and the financial situations of the company will pose no impact on the investment risk.

The double A grade (PAA) shows the strong capability of the issuing company to pay both interest and loan installments. The change in the economy, business and the financial performance of the company may affect the investment risk but the impact will be small.

The single A grade (PA) indicates the strong capability of the company to fulfill the interest and loan repayment but the change in the economic situation and the company's business performance could affect the investment risk.

The double B rating (PBB) is given to securities which carry a possible risk. The capability of paying the interest and debts is there but it could easily be affected by the change in the economy and the business performance of the company.

The single B rating (PB) indicates that a debt instrument carries risk and the capability to pay the debts and interests is weak and could easily be affected by the change in the economy and the business performance of the issuing firm.

The single C rating (PC) is placed on speculative debt instrument, which poses high default risk.

The single D, the lowest grade, is put on the defaulted bonds.(hen)