RPT- Fitch Affirms Indonesia's MPM Finance at 'A-(idn)'; Outlook Stable

Thu Jan 16, 2014 3:08am EST

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Jan 16 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed Indonesia-based PT Mitra Pinasthika Mustika Finance's (MPM Finance) National Long-Term Rating at 'A-(idn)'. The Outlook is Stable.

The rating reflects Fitch's expectation that MPM Finance will receive support from its parent, PT Mitra Pinasthika Mustika Tbk (MPM; A(idn)/Stable), in times of need.

The Stable Outlook reflects Fitch's expectations that MPM will continue to support MPM Finance in case of need.

'A' National Ratings denote expectations of low default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions may affect the capacity for timely repayment to a greater degree than is the case for financial commitments denoted by a higher rated category.

KEY RATING DRIVERS

Fitch's view of a high propensity of timely support from MPM is underpinned by MPM Finance's strategic importance to the former's automotive business. This is underlined in MPM's 100% ownership of MPM Finance. MPM Finance has an important role in MPM's automotive business as it provides car financing services.

MPM Finance's asset quality weakened with non-performing loans (NPLs) increasing to 2.6% of total net manage receivables at end-September 2013 (end-2012: 1.7%). This is mainly due to the weaker finances of borrowers from the commodity sector. MPM Finance's management has implemented measures to improve its asset quality, including setting up a special team to focus on recovering existing NPLs and strengthening its collection processes.

In the near to medium term, Fitch expects profitability to be under pressure as credit impairment is likely to increase in the near to medium term due to the prolonged slowdown in the commodity sector. .

RATING SENSITIVITIES

MPM Finance's rating will move in tandem with that of its parent MPM. Any decline in MPM's ownership or support for MPM Finance, or a weakening of MPM Finance's strategic importance to MPM would exert downward pressure on the rating. ((Bangalore Ratings Team, Hotline: +91 80 6677 2513 satish.kb@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: satish.kb.thomsonreuters.com@reuters.net)

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