Ratings of 17 property firms downgraded

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)