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Fitch Upgrades Indonesia's MPMF to 'AA-(idn)'; Outlook Stable
November 22, 2017 / 6:59 AM / in a month

Fitch Upgrades Indonesia's MPMF to 'AA-(idn)'; Outlook Stable

(The following statement was released by the rating agency) JAKARTA, November 22 (Fitch) Fitch Ratings Indonesia has upgraded PT Mitra Pinasthika Mustika Finance's (MPMF) National Long-Term Rating to 'AA-(idn)' from 'A-(idn)' and its National Short-Term Rating to 'F1+(idn)' from 'F1(idn)'. The Rating Watch Positive, in place since 9 February 2017, has been resolved and the Outlook is Stable. The rating actions follow the sale of a 20% equity interest in MPMF by PT Mitra Pinasthika Mustika Tbk (MPM; BB-/Stable), an Indonesian integrated automotive company, to JACCS Co. Ltd., a Japan-based consumer finance company, earlier this year. The sale has resulted in JACCS becoming the new majority shareholder of MPMF with a 60% stake, while MPM owns the remainder. The rating upgrade reflects Fitch's view of JACCS's greater ability to provide extraordinary support to MPMF, if required, than that previously factored into the rating when MPM was the majority shareholder. 'AA' National Ratings denote expectations of very low default risk relative to other issuers or obligations in the same country. The default risk inherently differs slightly from that of the country's highest rated issuers or obligations. 'F1' National Short-Term Ratings indicate the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. On Fitch's National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country. Where the liquidity profile is particularly strong, a "+" is added to the assigned rating. KEY RATING DRIVERS MPMF's rating is support-driven, reflecting Fitch's expectation of a moderate probability of extraordinary support from the new majority shareholder, JACCS, if required. Fitch believes JACCS will have some incentive to support MPMF in times of need, given the former's long-term plans to expand its business in the ASEAN region - with Indonesia being its largest investment in the region so far. The parent's propensity to provide such support, however, is somewhat limited as Fitch views MPMF as a subsidiary of limited importance to JACCS. Fitch's view of MPMF's limited importance to JACCS primarily stems from the limited synergies between the two, our opinion that management operates with considerable independence and MPMF's modest contribution to its parent. JACCS mainly engages in the credit card and credit guarantee business in Japan, whereas MPMF focuses on financing for car and motorcycle purchases in Indonesia. We believe MPMF's management has a high degree of discretion in its operations and business strategy largely due to the differences in the two businesses and the minority shareholder's continuing significant influence on the company. MPMF's revenue accounted for about 8% of JACCS's total consolidated revenue by end-9M17. RATING SENSITIVITIES Any significant dilution in ownership by, or perceived weakening of support from, JACCS would exert downward pressure on the ratings of MPMF, including the possibility of multi-notch downgrades. Any perceived material change to the parent's credit profile could also affect MPMF's ratings. Greater synergies and integration between JACCS and MPMF, increased JACCS ownership in MPMF, or other forms of tangible support from the parent, could be positive for MPMF's ratings. Contact: Primary Analyst Tomi Rustamiaji Analyst +62 21 2988 6810 PT Fitch Ratings Indonesia Financial Institution DBS Bank Tower 24th Floor, Suite 2403 Jl. Prof. Dr. Satrio Kav 3-5 Jakarta, Indonesia 12940 Committee Chairperson Jonathan Lee Senior Director +886 2 8175 7601 Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(idn)' for National ratings in Indonesia. Specific letter grades are not therefore internationally comparable. Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. 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