Fitch rates Sumber Alfaria bond AA-(idn)

Fitch Ratings said it assigned a national long-term rating of AA-(idn) to PT Sumber Alfaria Trijaya Tbk.’s (Alfamart) proposed Rp 1 trillion bond issue.

The new bonds will be issued in two tranches: RP 600 billion of 9.7% notes due in three years and Rp 400 billion of 10% notes due in five years.

The new bonds are the last issue from Alfamart’s outstanding Rp 2 trillion bond program from which it issued Rp 1 trillion of notes in 2014.

Fitch said it does not expect the new issue to impair Alfamart’s overall credit profile because the proceeds will be used to repay existing bank loans.

The bonds are rated at the same level as Alfamart’s national long-term rating of AA-(idn) as they constitute direct, unconditional and senior unsecured obligations of the company, the agency said.

The ratings reflect the expectations of very low default risk relative to other issuers or obligations in the same country, Fitch said.

The ratings also consider weak consumer sentiment and more intense competition, which contributed to slower same-store sales growth of about 6% in 2014 compared with a historical average of about 9%, the agency said.

Alfamart controls about 50% of Indonesia’s mini-market store sector through multiple brands, Fitch said, with market leadership that provides buying power.

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