September 1, 2014 / 6:51 AM / in 3 years

Fitch Upgrades PT Sarana Multigriya Finansial (Persero) to AA+(idn)

(The following statement was released by the rating agency) JAKARTA, September 01 (Fitch) Fitch has upgraded the National rating of PT Sarana Multigriya Finansial (Persero)'s (SMF) to 'AA+(idn)' from 'AA(idn)'. The Outlook on the Long-Term rating is Stable. The National Short-Term rating is affirmed at F1+(idn). SMF's National rating was upgraded as a result of the re-assessment of the Indonesia-based company's link with the government under Fitch's Rating of a Public Sector Entity methodology. 'AA+' National Ratings denote expectations of very low default risk relative to other issuers or obligations in the same country. The default risk inherently differs only slightly from that of the country's highest rated issuers or obligations. 'F1+' Short-Term National Ratings indicate the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. On Fitch's National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country. Where the liquidity profile is particularly strong, a "+" is added to the assigned rating. KEY RATING DRIVERS SMF's ratings reflect its status as a corporation wholly owned by the state. Fitch believes there is a high probability of extraordinary state support for SMF, if needed. Fitch uses its public-sector entities rating criteria and applies a top-down approach in its analysis of the company. SMF was founded with the intent and purpose of promoting and developing the secondary mortgage market in Indonesia, to enhance capacity and sustainability of affordable public housing finance. To date, SMF has received IDR2trn in capital injections, with a further IDR2trn expected in 2014 and 2015- from the Ministry of Finance (MoF), its 100% shareholder. The Government of Indonesia believes that a home is a primary need and priority for every Indonesian family. SMFs establishment is part of the government policy of providing ownership of decent and affordable housing to every Indonesian family through the development of the secondary mortgage market. SMF reports directly to the MoF and its board of commissioners is appointed by the Ministry. SMF is audited by an independent public accounting firm annually, and is subject to audit by the state auditor. SMF has focussed on increasing its financing commitment to mortgage lending, with total loans rising to IDR6,230.4bn in the financial year ending December 2013 (FY13), from IDR4,778bn in FY12. Its main source of revenue is interest income, which increased to IDR542.8bn in FY13 compared to IDR430.5bn in FY12. The company has forecast interest income to rise to IDR1,596bn by FY16rom increased activities as loans are projected to rise to IDR17,627bn by that date from 6,230bn in FY13. SMF expects to issue IDR2.5trn of debt and facilitate an IDR1.5trn securitization transaction in FY14. The company's management has decided to limit debt-to-equity ratio at 4x of equity as a means of leverage. SMF uses a mixture of bonds and medium term notes to finance its operations. In addition, SMF's role in the local secondary mortgage market has been expanding since 2009. It provided credit enhancement to six residential mortgage-backed securitisation (RMBS) issues. SMF has been actively involved in all of PT Bank Tabungan Negara (Persero) Tbk (BTN)'s RMBS issues, which have totalled IDR3.96trn to date. RATING SENSITIVITIES Downward rating pressure could arise from any negative changes to SMF's governance through the government's ownership being diluted or a reduction in MoF's influence on its board of commission may trigger a rating downgrade. A full list of rating actions is as follows: National Long-Term Rating upgraded to 'AA+(idn)'from 'AA(idn)' ; Stable Outlook National Short-Term Rating affirmed at 'F1+(idn)' Senior unsecured bond programme 2011 upgraded to 'AA+(idn)' from 'AA(idn)' Senior unsecured Self-Registration Bond tranche I 2011 upgraded to 'AA+(idn)'from 'AA(idn)' Senior unsecured Self-Registration bond tranche II 2012 upgraded to 'AA+(idn)'from 'AA(idn)' Medium term notes V/2013 affirmed at 'F1+(idn)' Medium term notes VI/2013 affirmed at 'F1+(idn)' Contact: Primary Analyst Stefanus Yuniardhi Associate Director +62 21 2988 6809 PT Fitch Ratings Indonesia DBS Bank Tower 24th Floor, Suite 2403 Jl. Prof. Dr. Satrio Kav 3-5 Jakarta, Indonesia 12940 Committee Chairperson Raffaele Carnevale Senior Director +39 02 87 90 87 203 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(idn)' for National ratings in Indonesia. Specific letter grades are not therefore internationally comparable. Additional information is available at Applicable criteria, 'Tax-Supported Rating Criteria', dated 14 August 2012, and 'Rating of Public Sector Entities - Outside the United States', dated 04 March 2014, and "National Scale Ratings Criteria", dated 30 October 2013, are available on Applicable Criteria and Related Research: Tax-Supported Rating Criteria here Rating of Public-Sector Entities - Outside the United States here National Scale Ratings Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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