Fitch Ratings has downgraded
At the same time, Fitch has downgraded the company's senior unsecured
Fitch Ratings Indonesia has simultaneously downgraded KIJA's National Long-Term Rating to 'CC(idn)', from 'BB+(idn)'.
The downgrade reflects increasing uncertainty over whether KIJA will be able to obtain financing to address its
'CC' National Ratings denote the level of default risk is among the highest relative to other issuers or obligations in the same country or monetary union.
Key Rating Drivers
Distressed Capital Transaction Likely: We believe there is heightening uncertainty as to whether KIJA will be able to refinance its notes amid weak investor sentiment, with capital market dislocation stemming from broader economic conditions. Market reports suggest that the company may need to pursue a bond exchange if alternative financing is unavailable or at acceptable terms. We may regard a bond exchange that results in a material reduction in original terms as a distressed debt exchange, as it could be seen as being done to avoid a default amid weak market access.
Bank Access Supportive, But Insufficient: KIJA obtained a
Presales to Moderate: We forecast presales, excluding KIJA's joint venture - PT Kawasan Industri Kendal - to fall by 5% in 2023 to around
We expect industrial land sales to account for the majority of presales in the next two years, with affordable homes and commercial land plots making up the balance.
Derivation Summary
KIJA's ratings reflect our view of the company's increased refinancing and liquidity risk, given market reports that it will undertake a bond exchange on its
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer
Presales, excluding the Kendal joint venture, to fall to around
Non-development EBITDA of around
Land banking and capex, excluding Kendal, of around
Considering Kendal's ongoing development plans, we do not assume any dividends in 2022 and 2023
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Significant and sustained improvement in liquidity
Successful refinancing of outstanding debt without a material reduction in original terms
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A further weakening in liquidity
An announcement of a bond exchange that Fitch considers to be a distressed debt exchange
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
See Key Rating Drivers above.
Issuer Profile
KIJA is an
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
KIJA has an ESG Relevance Score of '4' for Management Strategy, as it has not fully addressed market concerns on debt maturities amid limited access to capital. This has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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