Fitch Ratings has affirmed PT Garuda Indonesia Tbk's (Garuda) National Long-Term Rating at 'BBB+(idn)' and revised the Outlook to Stable from Negative. At the same time, Garuda's senior unsecured debt class rating and rating on its outstanding IDR2trn bond due in 2018 have also been affirmed at 'BBB+(idn)'.
'BBB' National Ratings denote a moderate default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment than is the case for financial commitments denoted by a higher-rated category.
The Outlook revision to Stable reflects the improvement in Garuda's operating metrics, which was driven by lower fuel prices and cost-efficiency measures the company implemented in the 12 months to September 2015. Fitch expects the improved profitability to allow Garuda to reduce its leverage, as measured by adjusted debt to funds from operations (FFO), to about 5.8x as at 31 December 2015, from more than 9.0x at end-2014. Fitch expects leverage to remain below 6.0x over the next one to two years.