Ratings of 17 property firms downgraded
JAKARTA (JP): The country's only ratings agency PT Pemeringkat Efek Indonesia (Pefindo) announced yesterday that it had downgraded credit ratings of 17 companies in the property and building materials sectors.
The property companies whose ratings were downgraded include PT Mulia Land, PT Muliasentra Gunaswakarya, PT Jakarta International Hotel Development, PT Duta Anggada Realty, PD Sarana Jaya, PT Pudjiadi Prestige, PT Sona Topas Tourism, PT Muliakeramik Indah Raya, PT Muliaglass, PT Eka Gunatama Mandiri, PT Duta Pertiwi, PT Pakuwon Jati, PT Suryamas Dutamakmur, PT Dharmala Intiland, and PT Kawasan Industri Jababeka.
Pefindo said in a statement that the ratings downgrade reflected the adverse impact of the firms' foreign currency obligations following the rupiah's depreciation against the U.S. dollar.
It also reflected higher interest rates in the domestic banking system, and a projected contraction of disposable income which will reduce property demand.
It said the monetary crisis would mean that property companies in general would have lower income streams escalating total debts, potential debt refinancing problems and heightened liquidity pressures.
But it said the monetary crisis would not have a negative impact on property companies with relatively stable income streams from their investment property portfolios like PT Mulialand and Pakuwon Jati; strong market positions like PT Mulialand and PT Ciputra Development; or relatively conservative financial policies such as PT Jaya Real Property.
However, as of 1997, the foreign currency debt exposure of those 17 companies was worth about US$2 billion which accounted for more than 50 percent of their total debts.
"Rupiah depreciation will extend average debt capitalization to about 70 percent for 1998."
A large amount of foreign currency debt exposure coupled with limited hedged activities will substantially weaken the financial profit of most property companies, it said.
The likely tightening of credit available to property companies combined with high interest rates has deferred projects under construction and delayed some new investment projects.
The ratings agency lowered PT Mulialand's long term debt credit rating to idBBB+ with a negative outlook from idA+.
PT Muliasentra Gunaswakarya's long term debt rating was lowered to idBBB with a negative outlook from idA, while PT Jakarta International Hotel Development's rating was cut to idBB.
The agency downgraded the long term debt credit rating of PT Ciputra Development and PT Ciputra Surya to idBB- with negative outlook from idBBB due to their aggressive expansion program, profit deterioration, poor capital structure and unfavorable cash flow protection.
The firm's large foreign debts, more than 70 percent of its total debts, combined with rupiah devaluation against the American dollar and high interest rates in the banking system had taken its capital structure to an unfavorable level, Pefindo said.
Pefindo said PT Jaya Real Property's long term debt rating was also downgraded to idBBB- from idBBB+ because the company was expected to perform poorly. (aly)