Property Developer's Strong Liquidity Will Offset Rupiah's Decline: Moody's
Jakarta. According to International rating agency Moody's Investors Service, though weakening rupiah ̶ which depreciated to a 17-year low against the US dollar ̶ is credit negative for Indonesian property developers, strong liquidity levels can offset any negative impact of the currency's decline over the next 12 months.
"The rupiah's 13 percent year-to-date depreciation against the US dollar is credit negative for Indonesian property developers, because two-thirds of their debt is in US dollars, while their revenue is in rupiah," Jacintha Poh, Moody's assistant vice president and analyst, said in a statement on Monday.
She elaborated that the rupiah's depreciation beyond 14,000 against the greenback last Sunday —the lowest level since 1998 — has reduced the headroom developers have within their rating thresholds, and left 80 percent of their total hedged US dollar bond principal unprotected by option facilities.
"Nevertheless, we expect the property developers' healthy liquidity levels to offset rupiah weakness over the next 12 months," said Poh, who authored a Moody’s report titled "Property Indonesia: Rupiah's Slide to 17-Year Low Is Credit Negative for Developers.”
The rating agency performed a sensitivity test on the five Indonesian property developers – Bumi Serpong Damai, Pakuwon Jati, Alam Sutera Realty, Modernland Realty and Lippo Karawaci– to measure their resilience for their interest coverage and leverage ratios, in the event that the rupiah depreciates to 15,500 against the US dollar.
“With the rupiah above 14,000 against the US dollar, only approximately 20 percent of the companies' total hedged US dollar debt are protected as of June 30. Nonetheless, there is no imminent refinancing risk, because the US dollar debt maturity profiles are mostly long-dated,” the statement said.
The rating agency expects all five developers to maintain healthy liquidity profiles over the next 12 months, thanks to their strong cash positions and solid cash flows.
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