Shelf Registration Bond II SAN Finance Tranche II Year 2017

BOND STRUCTURE
Bond Name : Shelf Registration II SAN Finance Tranche II Year 2017
Issuance Size : IDR 1,500,000,000,000 (one trillion and five hundred billion rupiah) in principal amount
Rating : idAA- (Double A Minus), stable outlook by PT Pemeringkat Efek Indonesia (“Pefindo”), AA(idn) (Double A), stable outlook by Fitch Rating Indonesia

Tenures : Series A (370 days), Series B (3 years), Series C (5 years)
Coupon : Series A 7.50%-8.00% per annum, Series B 8.15%-9.00% per annum, Series C 8.50%-9.25% per annum
Coupon Payment : Quarterly

Collateral : 60% of financing receivables with due maximum 90 days
Use of Proceeds : Working capital for financing facility
Listing : PT Bursa Efek Indonesia (“IDX”)

COMPANY BACKGROUND
PT Surya Artha Nusantara Finance (“The Company”) was established on 25 August 1983, formerly known as PT Sangga Loka Subur and changed its name to PT Surya Artha Nusantara Leasing in 1984 and start focusing on financing heavy equipment. Later in 1989, the Company changed its name again to PT Surya Artha Nusantara Finance and obtained a license to operate as a financial institution from the Minister of Finance of Republic of Indonesia.

The Company is a joint venture company owned by PT Astra International Tbk (“AI”) through its subsidiary, PT Sedaya Multi Investama (“SMI”) along with Marubeni Corporation Group, with ownership of each at 60% and 40%. As part of the Astra Group with the financial services structure, the Company is financing heavy equipment and its supporting vehicles through leasing with option rights (financial lease) and consumer finance. At the end of 2012, the Company began to diversify financing through factoring. The Company classifies its financing portfolio into the mining, agro, forestry, construction and industry segment.

In conducting its business activity, the Company relies on its marketing network in which had amounted to 11 offices excluding the branch office which spread in 5 regions such as DKI Jakarta, Java, Borneo, Sumatera, and Sulawesi as of 31 December 2015. The Company will continue to expand the marketing network in line with the development of the Company’s business.COMPANY BACKGROUND

SHAREHOLDERS COMPOSITION
Shareholders Profile:
PT Sedaya Multi Investama (“SMI”) is a subsidiary of PT Astra International Tbk (“AI”) which owns practically in several AI’s subsidiaries engaged in the financial services industry. The SMI is the parent of PT Astra Sedaya Finance (18.75%), PT Surya Artha Nusantara Finance (60%), and PT Komatsu Astra Finance (50%).

Marubeni Corporation (“MC”) has been established since 1858 that is one of the largest trading companies in Japan, which plays an important role in the Japanese economy. MC business fields include export and import associated with foodstuffs, food products, textiles, pulp and paper, to chemicals, metals, and including foreign trade.

PT Marubeni Indonesia (“MI”) was established in 1993 with the scope of business in the wholesale trade. MI is 99.96% owned by Marubeni ASEAN Pte Ltd located in Singapore, which is wholly owned by Marubeni Corporation.

BUSINESS SEGMENT COMPETITIVE ADVANTAGE
The Company’s main competitive advantage lies in the following factors:
Strong synergies with Astra subsidiaries. SAN Finance is basically a financing arm of Astra International (AI) for heavy equipments products whereas AI has United Tractor (59.5% owned by AI) under its subsidiary operating in heavy equipment business. Besides UT, SAN Finance also has a joint financing cooperation with FIF Group (also owned by Astra) where they jointly finance 2W vehicles which carry high yields.

Benefited from strong Komatsu’s market share. The Company provides heavy equipment financing facilities, especially Komatsu brand products which is distributed by PT United Tractors (“UT”). Komatsu is a leader in heavy equiment market with 36% market share in Indonesia. This should give an advantage for the company in order to maintain strong position in heavy equipment financing industry.

More diversified earning stream. The company, however, have lowered exposure in heavy equipment leasing since 2012 amidst the backdrop of weak commodities prices. As alternative, the company widened its exposure to consumer, working capital financing and factoring. Financial leasing revenue contribution has then decreased to 40% in 9M2016, down sharply from a high of 70% in similar period a year ago. Meanwhile, a non financial leasing revenue contribued up to 36% of total revenue, rising from only 11% in 9M15.

BUSINESS OUTLOOK
In 2015, Komatsu was sold at 2.124 units, down by 40% compared to a year ago. However, Komatsu brand still leads heavy equipment market in Indonesia with a domestic market share of 36%. Heavy equipment industry was plagued by depressed commodities prices in the past few years. However, the industry is expected to rebound in 2017 in line with the government’s plan to speed up infrastructure development.

Besides, business opportunities are still wide open given the financial services authority has enabled the financing company to tap into broader market including mortgage and working capital financing.

Macro condition in 2017 is expected to recover, underpinned by a slight rebound in commodities prices and stable household consumption. Therefore, the company has prepared a set of strategies grab a new opportunity in 2017. The company will strengthen its focus on heavy equipment financing business and widening its revenue stream by diversifying its financing portfolio in line with the implementation of new OJK rules that widened the scope of financing business into multiple services including investment financing, working capital financing, and other financing. Nevertheless, the company will remain prudent and selective in tapping new business.

BUSINESS RISK
Here are some of the business risks faced by the Company in operation:

1. Risk Related to Business Activities
a. Financing Risk
b. Funding Risk
c. Operational Risk
d. Competition Risk
e. Macroeconomic Risk
f. Monetary Policy Risk
g. Changes in Foreign Exchange Risk

2. Investment Risk For Bondholders
a. Liquidity Risk. The risk that the bond may be not liquid due to the type of bond as long term investment instrument
b. Default Risk. A risk resulting from the failure of the company to make payments of interest and principal at a maturity time, or the failure of the Company to satisfy the other provisions stipulated in the bond contract bond as the impact of the company’s financial deterioration.