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oody'€™s Investors Service has assigned the '€œB1'€ rating to the proposed senior unsecured bond ratings to be issued by the publicly listed developer, Pakuwon Jati. The rating comes with a stable outlook.

Moody'€™s official statement, which was made available on Thursday, said that the Surabaya-based developer had announced that it intended to raise up to US$175 million from the bond issuance, which would then be allocated to refinance the company'€™s outstanding loans, and pay for acquisition transactions and working capital.

'€œIf the planned bond issuance is successful, Pakuwon Jati will extend its debt maturity profile to 2019 and strengthen its ability to finance and execute its expansion strategy,'€ Jacintha Poh, a Moody'€™s analyst, said in a statement.

'€œHowever, total debt and interest expenses will rise in the near term, negatively affecting its financial metrics in 2014. Nonetheless, we expect its financial metrics to remain well within our rating parameters,'€ added Poh, who is also the lead analyst for Pakuwon.

Pakuwon possesses cash and cash equivalents of Rp 2.2 trillion ($166.94 million), enough to cover 5.5 times its short-term debt.

The rating agency said that Pakuwon'€™s well-balanced portfolio of development and investment properties were the reasons for the rating.

The rating also reflected Pakuwon'€™s established profile in Surabaya and its increased presence in Jakarta, the two largest cities in Indonesia, according to a Moody'€™s'€™ statement.

'€œThe property developer is well-poised to benefit from the rising numbers of middle-class consumers and rates of urbanization, given that its superblocks are strategically located near the central business districts of their respective cities,'€ the statement read.

'€œWe expect Pakuwon Jati'€™s revenue to grow approximately 15 percent this year, with the growth in its development revenue supported by progressive recognition of marketing sales achieved in previous years.'€

Meanwhile, the growth in its recurring revenue will be supported by occupancy rates of over 90 percent and gradual increases in rental rates across its three large shopping malls '€” Tunjungan Plaza in Surabaya, and Gandaria Mall and Kota Kasablanka Mall in South Jakarta.

The stable outlook reflected Moody'€™s expectation that Pakuwon would be well-supported by recurring income from its investment properties, as well as its disciplined approach to growth.

In a recent press conference, Pakuwon Jati said that is was among the few Indonesian developers that was able to generate high-recurring income, having booked 47 percent of contribution to its 2013 revenue.

The company, which has a diverse portfolio of investments, is currently Jakarta'€™s second biggest mall developer after Agung Podomoro Land. It is the largest mall operator in its home city of Surabaya.

'€œPakuwon has confirmed the plan to issue $175 million bonds,'€ business development director Ivy Wong told The Jakarta Post, declining to offer further comment.

The developer, as previously reported, was also seeking to raise Rp 1.75 trillion from a non-preemptive rights shares offering of 4.81 billion new shares, representing 10 percent of its enlarged capital.

Proceeds from the rights issuance will be used to finance the company'€™s expansion plans for the next two years. Pakuwon has planned to disburse Rp 1.8 trillion in capital expenditure and is planning to launch two projects in the third quarter of this year; the Grand Pakuwon township in Surabaya and a condominium tower in South Jakarta. (aml)