Sinar Mitra issue IDR100 billion bonds

PT Sinar Mitra Sepadan will issue IDR100 billion bond. Fitch Ratings has today assigned PT Sinar Mitra Sepadan Finance's (SMS) proposed Rupiah senior unsecured bond of one to three years an expected rating of BBB+(idn).
The issue is rated the same as SMS's current National Long-term rating of BBB+(idn) with a Stable Outlook. The final rating is contingent on the receipt of final documents conforming to information already received.
The issue rating takes into account SMS's niche focus on used-car financing, its experienced management team, as well as its relatively good asset quality despite some weakening since Q408. Fitch views that any significant deterioration of asset quality or funding condition is likely to exert downward pressure on its rating.
With the recent improvement of economic conditions in Indonesia since Q2 2009, absolute NPLs declined by 12% to IDR9.1 billion at end-August 2009 (June 2009: IDR10.4 billion) and amounted to a lower 0. 8% of receivables from 1.1% at end-June 2009.
Fitch notes that SMS's rapid loan growth was mainly financed by bank loans through channelling and joint financing schemes, which caused its debt to equity ratio (DER) to rise to 9.5x in end-2008 (2007: 3x).
Following capital injection and conversion of convertible bonds to equity by its shareholders however, DER declined to 5.2x at end-June 2009. The terms of these channelling and joint financing schemes are usually matched with the receivables in terms of tenure (about three years) and fixed in terms of interest rates.
Established in 2000, SMS focuses on the used-car financing business outside Java, especially in Sumatra. SMS is ultimately owned by a few private individuals through a holding company, PT Padma Terang Sentosa, which has a majority ownership in SMS (99.7% as at end-September 2009).