Pandemic Effects in Asset Backed Security. The impact of the Covid-19 pandemic is increasingly widespread in the alternative investment industry. After making Ciptadana Asset Management’s Real Estate Investment Fund (DIRE) product to be liquidated. It is now the turn of the asset backed security collective investment contract product from Mandiri Investment Management. That is threaten with default.
The unpredictable Pandemic Covid-19 was the main cause of Garuda Indonesia Tbk (GIAA IJ). Postponing the obligation to pay the second principal amortization of EBA Mandiri GIAA01 – Securities. On Class A Ticket Sales Income (MGIA01). At the time of the issuance of the Garuda Indonesia asset backed security. It was relatively safe because of ticket sales for the pilgrimage departure.
Garuda Indonesia, every year there must be sending pilgrims. However, the outbreak of Covid-19 since the beginning of the year prompt the government to impose social restrictions. To reduce the movement of people. Governments in some areas restrict land transportation and even close access to sea and air transportation. It also caused Garuda Indonesia revenues to drop by 90%.
For other asset backed security products. Their prospects and risks must be measured based on the underlying assets use and the issuing company. Meanwhile, asset backed security issue by companies, with strong cash flow are still safe for now. However, the risk of disruption to the issuance of the issuing company from the impact of Covid-19 must remain a concern of investors.
Meanwhile, several other asset backed security listed on the Indonesia Stock Exchange (IDX) have basic assets such as pension credit bills. As well as corporate loans, mortgages, trade receivables, and toll road revenues. For asset backed security with mortgage underlying assets. The risk is also increasing because there are potential customers who have difficulty paying mortgage during the pandemic.
Not to mention, banks are also face with the threat of high levels of non performing loans (NPLs). Thus, investors continue to keep a close watch on the business continuity of the issuer of asset backed security issuers, especially in terms of the company’s cash flow. Previously, we saw is the company’s revenue projection, but this year it is more the business continuity of the issuer.
Moreover, there are still many investors holding asset backed security from institutions that will hold to maturity. While for the issuance of asset backed security, telecommunications issuers or telecommunications towers still have the potential to be able to issue alternative investment products.
Because the two sectors have the prospect of business continuity in the pandemic. On the other hand, the asset backed security of the transportation and construction sector are expected to be difficult for the market to accept at least until the impact of the Pandemic on the real sector can be minimized.
As well as GIAA Asset Backed Security. Garuda Indonesia will continue to fulfill its Asset Backed Securities payment obligations by adjusting the company’s current liquidity conditions. Garuda Indonesia President Director Irfan Setiaputra said that amidst the liquidity of the Company due to the Covid-19 pandemic, the company was committed to continuing to fulfill its Asset Backed Securities payment obligations.
As well as GIAA explained the seriousness of the commitment was demonstrated by having paid part of the principal obligations along with investment results of Class A asset backed security for the period of July 2020. These payments are adjusted to the current liquidity conditions of the Company. Garuda Indonesia strives to continuously gradually complete these obligations.
Furthermore, GIAA is also opening communication with the asset backed security holders through Mandiri Investment Management as the investment manager, related to the plan to settle the remaining asset backed security payment obligations for the July 2020 period. Irfan explained that the Covid-19 Pandemic is undeniably having a significant impact on Garuda Indonesia’s operational performance.
GIAA’s revenue fell by 90% as a result of the decline in the level of demand for flight services. And policies restricting movement of people and airlines during the pandemic. The full service airline lost the majority of passengers in its busiest period. Including the closure of Umrah flight services since March 2020.
In the midst of various performance pressures face. GIAA believes it can still survive through a very challenging time for the aviation industry today. Meanwhile, the Indonesia Stock Exchange has announce the temporary suspension of trading in the GIAA01 Mandiri asset backed security. Which is a follow-up to the postponement of the payment of the asset backed security for the period of July 2020.
Referring to the Independent Asset Backed Security Collective Investment Contract GIAA01 – Securities Right to Ticket Sales Revenue. Regarding the fulfillment of the asset backed security payment obligations. The remaining payment for the July 2020 asset backed security payment can be complete no later than 90 days. Indonesia Securities Rating Agency (Pefindo) also mention. The ranking of the GIAA01 Class A Mandiri Collective Securities Asset Backed Security (KIK). It value at IDR 1.44 trillion downgrade from previously idA- to idCCC.