TEXT-Fitch affirms rating SANF at 'AA (idn)', outlook stable

Tue Oct 2, 2012 5:36am EDT

(The following statement was released by the rating agency)

Oct 02 - Fitch Ratings has affirmed the long-term national rating of PT Surya Artha Nusantara Finance (SANF) based in Indonesia at 'AA (idn)' with Stable Outlook and Short-term national rating at 'F1 + (idn)'. Fitch has affirmed the senior bond dollars II/2012 SANF at 'AA (idn)'.

SANF ratings reflect Fitch's expectation for their support and commitment to a strong and sustained shareholder, PT Astra International Tbk (AI). Ratings also consider the strategic importance of the SANF Astra Group in its business expansion in the heavy equipment sector. SANF is a finance company that is an extension of the Astra Group to support its business as a distributor of heavy equipment in Indonesia through its subsidiary, PT United Tractors Tbk (UT). UT sole distribution rights holders for Komatsu heavy equipment and SANF financing channel for brand Komatsu 19% of sales UT in the first half of 2012 (H112). Weakening support from the parent company, AI, will affect the ranking SANF.

Fitch notes that SANF has good asset quality is consistent with the absence of troubled loans (maturity greater than 90 days) or the removal of troubled loans over the past three years. However, strong credit growth in the last two years and the prospect of a challenging global economy with declining commodity prices and mining - sectors where SANF operate - can lead to an increase in problem loans in H212-2013.

Loans past due 1-30 days increased nearly two-fold to 13% of total receivables in H112 can lead to an increase in problem loans in a more challenging economic environment. Fitch believes a possible decline in asset quality can be controlled, given the company's strong credit risk management and strong asset quality supported by the relationship that has existed for a long time with suppliers and customers. Fitch expects profitability SANF will remain satisfactory in 2013 backed by the credit management and good financing costs. Profitability and allowance for bad loan will be able to continue to provide support when economic conditions are more challenging.

Fitch notes that the company's two shareholders, AI and Marubeni Group, provide additional capital of IDR400milyar in the second half of 2011 (H211) to support further business expansion. This helps SANF reduce the debt on loans to 4.8 x at the end of H112 from 7.2 x at the end of H111. Management will attempt to maintain a debt to below 8x loan in two years.

SANF founded in 1983 by the Astra Group and focus on heavy equipment financing business. The company is owned by Astra International (60% ownership) and Marubeni Group (40%).

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