Sunday, December 11, 2011

INDONESIA - RATINGS - Indonesia's Benchmark- Sized Global Sukuk Trust Certificates Rated 'BB+'

Standard & Poor's Ratings Services assigned its 'BB+' long-term foreign currency issue rating to the proposed issue of benchmarksized global Sukuk trust certificates by Perusahaan Penerbit SBSN Indonesia II (PPSI-II), a fully owned special purpose vehicle of the Republic of Indonesia (BB+/ Positive/B; axBBB+/axA-2).  (source)


The rating on the certificates reflects S&P's view that, under the related lease and repurchase agreement between the government and PPSIII, the government is obliged to make all payments to PPSI-II to ensure that the issuer has sufficient funds to make full and timely periodic distribution and principal payments to certificate holders.
We rate this issue on par with the sovereign's commercial financial obligations. This is because, in our view, the sovereign's contractual commitment gives the government a strong incentive to treat its obligations to PPSI-II under this transaction pari passu with its other obligations, including conventional debt.
We consider that governments may sometimes, in stressful fiscal situations, consider rent or lease obligations as subordinate to bonds or bank loans. However, in this case, we expect a default by the government on its obligations under this transaction would likely trigger a default on the certificates. We believe that the government will consider the performance of the certificates as being equally important as the performance of its conventional debt.
The ratings on Indonesia reflect continuing improvements in the government balance sheet and external liquidity, against a backdrop of a resilient economic performance and cautious fiscal management. Rating constraints include Indonesia's low per capita income, structural and institutional impediments to higher economic growth, and relatively high inflation. In addition, the country remains vulnerable to external shocks partly because the domestic capital markets are shallow; but this risk has lessened.
The positive outlook on the sovereign ratings reflects the likelihood of an upgrade if inflation is tamed while balance sheet improvements continue, likely in combination with successful implementation of at least parts of the government's fiscal, administrative, and structural reform agenda.
We may raise the ratings if inflation pressure diminishes, the external debt burden declines, the sovereign's balance sheet improves, or reforms such as a subsidy rationalization suggest that fiscal and external vulnerabilities are further reduced. Conversely, a stalling of reforms or the absence of timely and adequate policy responses to renewed fiscal or external pressures would result in the rating stabilizing or weakening.
About the Author
Standard & Poor's, a subsidiary of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. With offices in 23 countries and markets, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for 150 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions.

Source:  http://www.islamica-me.com/article.asp?cntnt=739

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