Pefindo cuts credit ratings of 16 listed firms

JAKARTA (JP): The country's only rating agency, PT Pemeringkat Efek Indonesia (Pefindo), announced yesterday that it had cut the credit ratings of 16 publicly listed companies due to a decline in their business performance.

Pefindo's president, Farid Harianto, told a news conference yesterday that the rating company had also put the credit ratings of 26 other listed companies on an alert list for the same reason.

"The rating adjustments were made after a re-evaluation of their latest financial performances," Farid said, adding that the sharp drop in the rupiah against the dollar had lowered profit projections of most listed companies.

He refused to mention the names of any companies whose ratings had been downgraded.

The agency's re-evaluations showed that the impact of the crisis varied across many industrial sectors and had affected many corporations.

Farid said the rupiah's fall and the sharp rise in domestic interest rates would hamper companies with high leverage and large unhedged foreign currency exposures.

"And companies which do not have any preferential access to liquidity will face problems too," he said.

Property, banking and finance companies would see profits deteriorate and have the biggest cash flow problems this year.

"Pefindo has lowered 10 property companies' ratings," he said.

He said many property companies had had their ratings' lowered because most property companies financed their rapid expansion with unhedged offshore borrowings.

"Besides that, the high-interest rate environment has a negative impact on the demand for residential housing and escalates the costs of property under development," Farid said.

The currency crisis had also caused the overall asset quality of the banking and financial sectors to deteriorate sharply.

As a result, he said, Pefindo placed most banking and other financial companies on the alert list with negative implications because most of these banks' borrowers did not have a adequate means to repay their loans.

"The rupiah's depreciation and the higher interest rates will undoubtedly result in an increase of non-performing loans," he said.

"The adverse impact of the crisis on the property sector is also expected to flow through the banking sector which has an estimated one fifth of its loan portfolio exposed to property companies," he said.

Farid, however, said that companies which exported most of their products and had a strong financial structure would not be adversely affected by the currency crisis.

"The currency crisis is like a windfall profit for these companies as their dollar-denominated debts are hedged naturally," he said.

Companies in this category include PT Barito Pacific Timber, the Sinar Mas Group, PT Riau Andalan Pulp & Paper and agro-based industries like Davomas Abadi, Fiskar Agung and Astra Agro Niaga, he said. (aly)