Duff & Phelps Downgrades Indonesian Bank and Structured Transactions Ratings

Duff & Phelps Credit Rating Co. (DCR) has taken a significant step in assessing the creditworthiness of Indonesian bank and structured transactions by downgrading their ratings. The deteriorating creditworthiness of the government of Indonesia, fueled by the country's increasingly unstable political situation, has put the viability of the Suharto government in question. The resulting social unrest has worsened the operating environment for these transactions. Although the Sinar Mas Group's financial support positively influences P.T. Bank Internasional Indonesia's rating, the situation remains uncertain, and further deterioration in credit fundamentals could put sovereign debt service coverage at risk.

Key Takeaways:

• Duff & Phelps Credit Rating Co. (DCR) downgraded the ratings of its Indonesian bank and structured transactions, with all ratings remaining on Rating Watch--Down.
• The downgrades affect P.T. Bunas Finance TBK Auto Loan Receivables, P.T. BII Trust Certificates Credit Card Receivables, and P.T. Bank Internasional Indonesia's Foreign Currency (sr. unsec.) and Local Currency (sr. unsec.) ratings, which were reduced to 'B-' (Single-B-Minus).
• The deteriorating creditworthiness of the Indonesian government, due to social unrest sparked by economic decline and rising prices, has worsened the operating environment for these transactions.
• The Sinar Mas Group's financial support remains crucial for P.T. Bank Internasional Indonesia's rating, with approximately US$15 billion in foreign exchange resources available to cover sovereign debt service payments.
• DCR continues to monitor developments in Indonesia closely and believes that further deterioration in credit fundamentals could put sovereign debt service coverage at risk.

Statistics:

• US$15 billion in foreign exchange resources remain available to cover sovereign debt service payments.
• All ratings for P.T. Bunas Finance TBK Auto Loan Receivables, P.T. BII Trust Certificates Credit Card Receivables, and P.T. Bank Internasional Indonesia's Foreign Currency (sr. unsec.) and Local Currency (sr. unsec.) ratings were downgraded to 'B-' (Single-B-Minus).
• The ratings remain on Rating Watch--Down.

Sources:

• Duff & Phelps Credit Rating Co.
• CONTACT: Amy Lai, 852-2901-0502 or laidcr@hkstar.com, or Angie Yeung 522-2901-0504 or yeungdcr@hkstar.com, both of DCR Hong Kong; or Roger M. Scher, 212-908-0240 or scher@dcrco.com, Ron Dadina, 312-368-3123 or dadina@dcrco.com, or Sam Fox, 312-606-2307 or fox@dcrco.com, all of Duff & Phelps Credit Rating Co.