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View all search resultsPos Indonesia’s default tests Danantara rescue strategy
Repeated cases of missed bond payments could raise concerns about the government's contingent liabilities related to troubled state-owned enterprises (SOEs).
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Students visit the office of postal company PT Pos Indonesia during a study tour in Medan, North Sumatra, on Aug. 13, 2018. (Antara/Septianda Perdana)
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T Pos Indonesia's credit rating downgrade following a bond repayment default has raised questions about how state asset fund Danantara will handle struggling state-owned enterprises (SOEs). Experts warn that similar defaults could undermine confidence in government backing and drive up borrowing costs for other state-run firms.
The postal company, which has expanded into courier delivery, logistics, financial services and social assistance disbursement, is facing liquidity pressures after missing a Rp 24.1 billion (US$1.4 million) payment on the sixth installment of returns on its ijarah sukuk due on July 8.
Fitch Ratings on Tuesday downgraded Pos Indonesia’s national long-term rating from “A” to “C” after the company missed the scheduled payment.
The credit rating agency also cut the company’s standalone credit profile to “c” from “bbb”, indicating a sharp deterioration in Pos Indonesia’s ability to meet its financial obligations without considering external support.
Read also: Analysis: SOE governance reform faces a major test at Pos Indonesia
“The delay is temporary and solely related to short-term cash flow conditions. It does not reflect the company’s business continuity or the quality of its services,” Pos Indonesia corporate secretary Iwan Gunawan said in a statement to The Jakarta Post on Wednesday.
According to a disclosure to the Indonesia Central Securities Depository (KSEI), Pos Indonesia said its cash was insufficient to cover current outflows, with significant cash flow pressure from benefits paid to retirees “outside the formal pension fund mechanism”.
