Fitch rates Modernland notes B

Fitch Ratings said it assigned Indonesia-based property developer PT Modernland Realty Tbk. a long-term issuer default rating of B with stable outlook.

The agency also assigned Modernland a B senior unsecured rating and an expected B(EXP) rating to its proposed senior unsecured dollar-denominated notes, with a recovery rating of RR4.

The proposed notes are to be issued by Modernland Overseas Pte Ltd. and guaranteed by Modernland Realty and wholly owned subsidiaries.

Fitch said Modernland's limited recurring revenue differentiates it from higher-rated global peers. Recurring income, which is derived from management estate fees and newly opened hotel operations, is still small at less than 10% of annual EBITDA.

The agency said it views Modernland's small recurring revenue base as a main constraint on its ratings, particularly given the cyclical nature of the property development sector.

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