S&P rates Indonesia sukuks BB+

Standard & Poor's said it assigned a BB+ long-term foreign-currency issue rating to a global sukuk trust certificate issuance program of up to $3 billion by Perusahaan Penerbit SBSN Indonesia III (PPSI-III), a fully owned special purpose vehicle of the Republic of Indonesia.

This issue is rated on par with the sovereign's commercial financial obligations.

The ratings are supported by the sovereign extending its full faith and credit for all payments under this transaction, S&P said, and its undertaking to treat these payments as direct, unconditional, unsecured and general obligations of Indonesia.

The obligations will rank equal in right of payment with all other unsecured and unsubordinated external indebtedness of the sovereign, the agency said.

S&P said it believes the government will consider the performance of the certificates as being equally important as the performance of its conventional debt and that a default by the government on its obligations under this transaction would likely trigger a default on the certificates.

These factors mitigate the possibility that, in a stressful fiscal situation, the sovereign would consider rent or lease obligations as subordinate to bonds or bank loans, the agency said.

The BB+ sovereign credit rating on Indonesia reflects the country's low per capita income, structural and institutional impediments to higher economic growth and still-high external leverage, S&P said.

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