W

hile the rupiah'€™s fall to a 17-year low against the US dollar is credit negative for Indonesian property developers, the developers'€™ liquidity levels are healthy and can offset any such currency weakness, according to the latest assessment made by rating agency Moody'€™s Investors Service.

In a report entitled Property Indonesia: Rupiah'€™s Slide to 17-year Low is Credit Negative for Developers, Moody'€™s assistant vice president and analyst Jacinta Poh explained that the rupiah'€™s weakening beyond Rp 14,000 per US dollar had reduced the headroom that developers had within their rating thresholds and had left 80 percent of total hedged US dollar bond principals unprotected by option facilities.

'€œThe rupiah'€™s 13 percent year-to-date depreciation against the US dollar is credit negative for Indonesian property developers, because two-thirds of their debt is in US dollars, while their revenue is in rupiah,'€ Poh, who is also the author of the report, said in a statement obtained by The Jakarta Post on Monday.

Nevertheless, Poh added that the liquidity levels of the property firms were healthy enough to weather the currency fall over the next 12 months.

For the report, Moody'€™s conducted a sensitivity test on five Indonesian property developers to assess the resilience of their interest coverage and their leverage ratios, in the event that the rupiah depreciated to Rp 15,500 per US Dollar.

The five developers tested by Moody'€™s included Bumi Serpong Damai, Lippo Karawaci, Pakuwon Jati, Alam Sutera Realty and Modernland Realty.

In the report, Bumi Serpong Damai emerged as the strongest of the five developers, while Lippo Karawaci emerged as the weakest.

Both companies have Ba3 stability ratings from Moody'€™s. The agency concluded all five developers maintained healthy liquidity profiles because of their strong cash positions and solid cash flows.

Moody'€™s report pointed out that while most of the five rated property developers had financial hedges in place to protect the principal amount of their dollar debt against the downside risk of any dollar/rupiah exchange rate volatility, the hedges only covered rupiah depreciation to a certain pre-determined level.

It also said that approximately only 20 percent of the companies'€™ total hedged US dollar debt was protected, as of the end of June this year, against the rupiah rising above Rp 14,000 per dollar.

However, the agency said the developers were not facing an imminent refinancing risk due to the dollar-debt maturity profiles being mostly long dated.

Moody'€™s said it viewed Lippo Karawaci and Alam Sutera Realty to be most exposed to the rupiah'€™s depreciation, given that their option facilities only provided coverage when the exchange rate was below 14,000. Nonetheless, their US dollar debt was long-dated and only due for repayment in 2019, it added.

The rupiah slid 3.7 percent this month to 14,053 per dollar, prices from local banks show.

It fell 0.5 percent on Monday, taking its decline for 2015 to about 12 percent, the worst performer among major Asian currencies after Malaysia'€™s ringgit, Bloomberg reported on Monday.

The currency weakened beyond 14,000 a dollar for the first time since 1998 this month as the benchmark stock index entered a bear market.