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Pemeringkatan BUMNEddy Handali, CFA
December 2017
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www.fitchratings.com
Fitch Ratings Indonesia
Ratings & Process
Rating Framework
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Credit Ratings
“Fitch's credit ratings provide an opinion on the relative ability of an entity to
meet financial commitments, such as interest, preferred dividends,
repayment of principal, insurance claims or counterparty obligations. Credit
ratings are used by investors as indications of the likelihood of receiving
their money back in accordance with the terms on which they
invested.”
Assigned to:
� Issuer – Corporate and Sovereign
� Debt instruments such as bond, sukuk and others
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� In 2005, First global credit rating
agency (CRA) to establish a
presence in Indonesia.
� In 2006, PT Fitch Ratings Indonesia
obtained a OJK (Bapepam-LK)
license to assign national ratings.
� Only international credit rating
agency accredited by the regulators
in Indonesia to assign ratings to local
currency debt issues in the domestic
market.
� Only rating agency that is able to
provide international and national
ratings in one rating process &
research report.
Fitch Ratings
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www.fitchratings.com
Brief Introduction
• Fitch celebrated its 100th year anniversary in Dec 2013, with dual
headquarters in London and New York.
• Globally, Fitch employs 2000 professionals spread in 50 countries, covering
3700 financial institution issuers, 1700 corporate, 1200 insurers and 104
sovereigns
• Fitch was the first to introduce the AAA – D rating scale in 1024
• Fitch is the first and only international rating agency with on-the-ground
presence in Indonesia.
• Fitch now maintains public ratings on 96 issuers (including sovereign) in
Indonesia, comprising 83 national ratings and 39 international ratings.
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As of August 2012
Global Presence
Mumbai
MonterreyMexico City
San Jose
San Salvador
Lima
Santiago
La Paz
Quito
São Paulo
Buenos Aires
Bogota
Milan
BarcelonaTunis
Kent
Madrid
Rio de Janeiro
Montevideo
Caracas
Istanbul
Paris
FrankfurtWarsaw
Moscow
Sandton
Bangalore
Hyderabad
Colombo
Tokyo
Hong Kong
Seoul
Bangkok
Taipei
Beijing
Singapore
Sydney
Kolkata
Chennai
NewDelhi
Jakarta
DubaiGuatemala
Toronto
New York
Chicago
San Francisco
Austin
Stockholm
ShanghaiLondon
• Fitch is a global ratings agency with 51 offices worldwide and over 2,000 employees
• In Asia-Pacific, Fitch has 17 offices
• With extensive Emerging Markets presence, Fitch is able to integrate international best practice with local
market knowledge
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Indonesia’s Coverage
17 21 23 29 29 35
3135 38
40 4449
77
7
1212
13
2012 2013 2014 2015 2016 11M17
Corporate Financial Institution Insurance
1621 21 23 24
3510
12 1213 14
14
0
1 13
3
2
2012 2013 2014 2015 2016 11M17
Corporate Financial Institution Insurance
National Scale
International Scale
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Rating Scale
International Scale
� Fund raising activities in
international capital
markets
National Scale
� National rating is defined
to serve the needs of a
local market. Mostly, it is
used in fund raising
activities in local capital
market.
� Using modified symbols
XXX(idn)
Comparisons among different national scales or to the international
scale are inappropriate and potentially misleading.
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Dual Ratings
Companies International Scale National Scale
PT Bank Mandiri Tbk BBB-/Stable AAA(idn)/Stable
PT Sarana Multi
Infrastruktur
BBB-/Stable AA+(idn)/RWP
PT Bank Negara
Indonesia Tbk
BBB-/Stable AA+(idn)/Stable
PT Wijaya Karya Tbk BB/Stable AA(idn)/Stable
PT Reasuransi
Nasional Indonesia
BB-/Stable AA-(idn)/Stable
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Rating Definition (National Scale)
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
AAALowest expectation of
default risk
Very low default risk
Low default risk
Moderate default risk
BB+
BB
BB-
B+
B
B-
D
CCC
C
CC
RD
Elevated default risk
Significantly elevated default
risk
Default is a real possibility
Default of some kind appears probable
Default is imminent
Restricted default
Default
National scale ratings are an opinion of creditworthiness relative to the universe
of issuers and issues within a single country.
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Rating Process
� Activity: The agency reviews the strength of an issuer‘s business and
financial risk profile relative to that of others
� Key Factors:
� Capable Analysts
� Robust and Transparent Criteria
� Sufficient information
.
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Rating Process
Perform
in-depth
Analysis
& Prepare a
Comprehensive
ReportCollect
Information
3
Appoint
the
analyst
2
Monitoring
Assign ratings,
Communicate
Result
Hold ratings
committee
5
4
1
Timing and order of steps may vary
6
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Criteria
Master Rating Criteria
� Global Bank
� Global Non Bank FI� Public-Sector Entities� Corporate� Insurance
Cross Sector Rating Criteria
� Parent and Subsidiary Linkage
� Partial Corporate Guarantee� National Scale Rating Criteria
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Stand-Alone Standalone Credit Profile Standalone Strength
Rating Framework
Key Factors:- Operating Environment- Company Profile- Management/Strategy- Risk Appetite- Financial Profile- Cash flow- Financial Flexibility
+ Support Likelihood of external support made
available to prevent a default
Key Factors:- Ability to
support- Propensity
to support
- Strength of Linkage
- Incentive to Support
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Rating Basis of Indonesian Companies
Stand-alone Sovereign Support Institutional Support
Bank Central Asia Bank Mandiri Bank ANZ Indonesia
Bank Danamon Indonesia Bank Negara Indonesia Bank BRISyariah
Bank Mayapada Lembaga Penjamin
Simpanan
Bank CIMB Niaga
Bank Muamalat Indonesia BPD Maluku Bank Commonwealth
Protelindo Pupuk Indonesia XL Axiata
Mayora Indah Waskita Karya Ciputra Residence
Japfa Comfeed Pelabuhan Indonesia I Astra Otoparts
Bumi Serpong Damai Sinar Mas Agro Resources
and Technology
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Industry Risk:Expansion/Consolidation
trends, Capacity
Structure: Relationship between parents & subsidiaries, Stand
Alone/Support
Cash Flows: Short term vs Long term, Impacts to
Profit & lLquidity, Sustainability Level,
Coverage
Capital Structure: Funding, Leverage
Financial Flexibility:Ability to redeploy assets
and revise plans,
Degree of access to range of debt & equity markets
Competitive Position: Market Position, Suppliers/Buyers Bargaining Power
Management: Track Record, Operating
Strategy, Risk Tolerance, Financial Policies,
Resource Availability
Operating Environment:Macroeconomics, Country
& Currency Risk
Qualitative Quantitative
Standalone Ratings
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Profile & Operating Environment: Overview of group strategy, Expansion Plans, Market Positioning
Templates: Fitch Liquidity template, Fitch capital
template
Holding Company Analysis: Holdco financial
statements, Holdco budgets/forecasts, Maturirtyprofile of assets & liabilities
Ownership, Support & Group Factors:
Shareholders, Support agreements, Formal inter-
group guarantees
Financial Profile: Performance, Funding & liquidity, Capitalisation &
leverage
Risk Management: Credit risk, Property finance,
Impaired loans, Securities holdings, Market risk,
Operational risk
Regulation/Legislation:Impact of Basel Committee rules on Capital & Liquidity, Risk weights for market &
counterparty risk, Recovery & resolution plans
Issuer
Standalone Ratings
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Propensity to Support
Strength of Linkage
� Status, Ownership and
Control
� Support Track Record and
Expectations
Incentive to Support
� Socio-Political Implication
of the SOE’s Default
� Financial Implications of
the SOE’s Default
- Type of SOE : a public mission or a corporate mission
- Assessment of the Factor: Very Strong, Strong, Moderate, Weak
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Notching Approach
� Equalized: SOEs’ IDR = Government’s IDR
� Top down minus 1, 2, 3: SOE’s IDR is a few notches lower than the
government’s IDR
� Bottom up plus 1, 2, 3: SOE’s IDR is a few notches above the SOE’s
standalone credit profile
� Standalone: SOE’s IDR = SOE’s standalone credit profile
� Constrained: When the SOE’s standalone credit profile is capped at
the government’s IDR
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Notching Approach
Equalized Top-Down Bottom-Up Standalone Constraint
Pertamina Bank Negara
Indonesia
Pelabuhan
Indonesia I, II, III
Perusahaan
Gas Negara*
Perusahaan
Listrik Negara
Bank
Tabungan
Negara
Angkasa Pura I Angkasa
Pura II*
Pupuk
Indonesia
Bank
Pembangunan
Daerah
Waskita Karya
Tbk
Lembaga
Penjamin
Simpanan
Wijaya Karya
Tbk
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Rating Constraint
� When an SOE’s standalone profile is above the government’s IDR,
the IDR of the SOE is likely to be constrained at the government’s
IDR level.
Countries International Scale
Singapore AAA / Stable
Malaysia A- / Stable
Thailand BBB+ / Stable
Philippine BBB / Stable
Indonesia BBB- / Positive
Vietnam BB- /Positive
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Companies International Rating
National Rating
PT Indosat Tbk BBB+ / Stable AAA(idn)
PT XL Axiata Tbk BBB / Stable AAA(idn)
PT Telekomunikasi Indonesia Tbk ? ?
Rating Constraint
� When an SOE’s standalone profile is above the government’s IDR,
the IDR of the SOE is likely to be constrained at the government’s
IDR level.
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Instrument Ratings
Subordinated BondsUsually Notched off from Issuer Rating
Issuer PT Bank UOB Indonesia
Issuer Rating AAA(idn)/Stable
Issue Subordinated Bonds
Issue Rating AA(idn)
Size IDR1 trillion
Senior BondsUsually Equalized with Issuer Rating
Issuer PT Pelabuhan Indonesia I
Issuer Rating AA(idn)/Stable
Issue Senior Bonds
Issue Rating AA(idn)
Size IDR1 trillion
The rating on Pelindo I's bonds is sensitive to changes to the company's senior unsecured rating, which will move in line with changes in Pelindo I's National Long-Term Rating.
The proposed subordinated bonds are rated two notches below the bank’sNational Long-Term Rating - one notch for loss severity to reflect their subordination and write-down features, and another notch for non-performance risk to reflect coupon and principal deferral risk
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Instrument Ratings
Senior BondsIssuer has high secured debt
Issuer PT Waskita Karya
Issuer Rating ‘A(idn)’/Stable
Issue Senior Bonds
Issue Rating ‘A-’(idn)
Size IDR3 trillions
Senior BondsIssued with Partial Guarantee
Issuer PT Ciputra Residence
Issuer Rating ‘A+(idn)’/Stable
Issue Senior Bonds
Issue Rating ‘AA-’(idn)
Size IDR300 billions
Bonds Rated Below National Rating: The issuance
are rated one-notch below the company's National
Long-Term Rating of 'A(idn)' due to its high secured
debt/EBITDA ratio, which reflects our expectation
that the recovery of the unsecured debt will be low in
a distressed scenario.
The rating is based on a partial credit guarantee for
20% of the principal amount offered by the
International Finance Corporation. The partial
guarantee reduces the loss severity in case of
default, raising the issuance's rating by one notch
above Ciputra Residence's rating.
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