Fitch trims Wijaya Karya

Fitch Ratings said it downgraded Wijaya Karya (Persero) Tbk. ’s long-term foreign- and local-currency issuer default ratings to BB- from BB. Concurrently, Fitch Ratings downgraded WIKA’s national long-term rating to A(idn) from AA-(idn). All ratings have been placed on rating watch negative.

“The downgrade follows Fitch’s revision of WIKA’s stand-alone credit profile (SCP) to b- and bbb-(idn), from b and bbb+(idn), respectively. This reflects 2Q20 performance that was significantly weaker than we expected, with WIKA’s leverage (measured by net debt/EBITDA) increasing to above 5x; the level above which Fitch would consider negative rating action. We forecast leverage to remain high for the next few years,” the agency said in a press release.

The RWN signals a possible re-assessment of Fitch’s outlook on government support, the agency said. “WIKA’s financial profile has deteriorated, and we think its credit metrics will remain under pressure over the medium-term given the economic slowdown caused by the coronavirus pandemic, as reflected in its revised SCP. WIKA, along with a number of other government-owned construction companies, last received tangible government support in 2016,” Fitch said.

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