EXTERNAL FACTORS WITH GOVERNMENT AND COMPANY POLICIES THAT HAVE AN IMPACT ON THE DEBT SERVICE COVERAGE RATIO OF COAL COMPANIES

Coal companies are industries that require large capital in building their industries, therefore companies must be able to know what external factors and internal factors that can affect financial performance and DSCR. This study uses a quantitative approach with secondary data from 4 coal companies listed on the IDX in 2011-2018. In this study structural and identity, equations are used with the 2SLS method. The results showed that (1) DSCR conditions, companies that had financial flexibility, with DSCR above the minimum requirements namely ADRO, INDY, and PTBA but BYAN did not have (2) the number of coal exports was influenced by the difference in Chinese GDP and the number of export coal sales, the number of domestic coal sales is influenced by differences in Indonesian GDP and the number of domestic coal sales. EBIT which is the company’s profitability performance is affected by gross profit. FCF is the company’s liquidity performance which is influenced by EBITDA and CAPEX. Principal payments are the company’s liquidity performance that is affected by liabilities. DSCR, corporate solvency performance is influenced by the principal payment ratio, (3) the decline in Chinese GDP is anticipated by lowering production costs, general and administrative costs, sales and marketing costs, and CAPEX, have an impact on increasing the financial flexibility of the company and its DSCR. If The amount of DMO is added and the domestic coal price was set by the government or by market price, it impacted on increasing the financial flexibility of the company and its DSCR.


JUNE 2020
Irwan Hermawan, Bonar M. Sinaga, Trias Andati of principal and interest expense to creditors can be calculated using Debt Service Coverage Ratio, this ratio is very useful for company management to find out financial flexibility and decision making (Sambasiva 2017). In 2001-2008 coal prices experienced an upward trend, resulting in profits for companies exporting coal. The increase in coal prices is due to economic growth in developing countries. Coal prices based on the New Castle Index (Australia) 2001-2018, are presented in Figure 1 Sumber: S&P Global Platts (2019)

Figure 1 Coal Prices Based on The New Castle Index (Australia) 2001-2018
Based on Figure  China decided to reduce coal imports, domestic demand is pursued by increasing domestic products to optimize its domestic mining business. The furnaces belonging to several ceramic factories in India stopped operating because of environmental issues. There was also a decrease in the volume of coal from Russia that was exported to Europe. So Russia is looking for alternative markets to Japan and Korea. The impact of Indonesian coal demand from Japan and Korea is reduced. In March 2018 the government intervened the price of coal supplied to the State Electricity Company at 70USD per ton with a calorific content of 6322 kcal. (Keputusan Menteri Energi dan Sumber Daya Mineral, 2018).

The trade war between the United States and
China has an impact on the economic growth of both countries and globally. China, as a coal importer, experienced a decline in GDP in 2018, to 6.6% the lowest GDP growth rate for 28 years (World Bank, 2018). This event coincided with the decline in Indonesia's coal commodity exports which affected the fluctuation of coal company Free Cash Flow on the Indonesia Stock Exchange in 2011-2018, presented in Table 1.   Table 1 in general free cash flow of coal companies fluctuated in 2011-2018, caused by fluctuations in earnings before interest and tax and coal sales. Free cash flow shows that positive companies make a lot of money that is used to run the company and invest to grow the business. negative free cash flow shows that the company is not able to generate sufficient cash to support the business (Andreas, 2017). When a company faces an unexpected event, it requires additional funds used to cover the losses of the previous year, invest, and expand. According to Damodaran (2002), one alternative source of funding that can be used to finance operating activities is debt. The description of the debt of coal companies in the Indonesia Stock Exchange in 2011-2018 is presented in Figure 2. Figure 2 shows the average debt to equity ratio of coal companies varies, showing the company has a consideration of facing situations and conditions for business continuity. Companies that have debts must pay off debts in the coming period. Failing to meet obligations to creditors causes the company to not have financial flexibility. Companies with a debt service coverage ratio of less than 1.20 do not have financial flexibility (Ruster, 1996). An illustration of the ability of a coal company to meet its obligations assessed using the debt service coverage ratio is presented in Figure 3.

Figure 3 Average Debt Service Coverage Ratio of Coal Companies on The Indonesia Stock Exchange in 2011-2018
Tambang Batubara Bukit Asam Tbk (PTBA). The company that lacks financial flexibility is PT Bayan Resources Tbk (BYAN). Therefore it is necessary to examine the condition of the debt service coverage ratio as an indicator of financial flexibility, external and internal factors that affect the company's performance, and its impact on the debt service coverage ratio of coal companies. Based on the background, the formulation of the research problem is: 1. The Value of debt service coverage ratio of each coal companies. 2. The factors affect the coal company's debt service coverage ratio. 3. The impact of external and internal factors on the coal company on its debt service coverage ratio

LITERATURE REVIEW Capital Structure
The company's capital structure is a combination of short-term debt, long-term debt, and equity. Companies can choose among many alternative capital structures (Acaravci 2015). According to Brigham (2011) funding using debt has advantages and disadvantages. The advantages of financing with debt include: (1) the interest paid on debt can be a tax deduction, and (2) the return on debt is fixed so that creditors do not participate in receiving company profits if the company achieves extraordinary success. Weaknesses in funding with debt include: (1) the use of large amounts of debt will increase the risk of the company, which increases the cost of debt, and (2) if the company experiences a bad period and its operating income is insufficient to cover interest expenses, shareholders forced to cover these shortcomings, otherwise the company will experience financial difficulties or lack financial flexibility.

Debt Service Coverage Ratio
Debt Service Coverage Ratio (DSCR) is used to see how far the company's ability to meet obligations that are fixed. The higher the DSCR, the safer the company's ability to meet its obligations. According to Pranowo (2010), the debt service coverage ratio is the company's ability to meet its obligations to pay debts, both the loan principal and interest payments. Companies with a DSCR value of less than 1.20 do not have financial flexibility (Ruster 1996). If the company has a specific debt service coverage ratio target, or the bank (creditors) sets a certain debt service coverage ratio, then the use of debt must be analyzed for its effect on that ratio. If new debt results in increased interest payments, it will be better if the new debt is canceled or re-evaluated.

Free Cash Flow
According to Brigham & Houston (2006) free cash flow as cash flow available to be distributed to all investors (shareholders and debt holders) after the company places all of its investments in fixed assets, new products, and working capital needed to maintain current operations walk. According to Damodaran (2002) the formula for calculating free cash flow is as follows:

Domestic Market Obligation
The domestic market obligation is the priority of supplying mineral and coal needs for domestic interests. Mineral and coal mining companies can still export their commodities as long as the minimum percentage of coal sales is met (Bappenas 2016

Previous Research Review
Some previous studies that are closely related to the debt service coverage ratio and its relevance to the study, as follows: Hooshyar et al. (2017) title of the research factors affecting the financial flexibility of firms listed on the Tehran stock exchange. The method used is regression. The results showed that financial lever-age and current ratio variables on companies listed on the Tehran Stock Exchange did not have a significant impact on financial flexibility and company size variables had a negative and significant impact on financial flexibility and profitability variables had a positive and significant impact on financial flexibility. Setianto and Kusumaputra (2017) with the title corporate financial flexibility, investment activities, and cash holding: evidence from Indonesia. The method used is regression. The results show that financial flexibility increases investment ability and reduces the sensitivity of investment activities to cash flow. Further analysis shows that financially flexible companies in Indonesia tend to have higher cash levels as a buffer to achieve financial flexibility.
Lameijer (2016) with the title research on financial flexibility, bidder's m & performance, and the cross-border effect. The method used is OLS (Ordinary Least Squares) regression. The results show partial evidence to support the positive effects of the value of financial flexibility and the crossborder effect on the performance of M&A bidders. Collectively, these findings increase understanding of the interdependence between financial flexibility and investment. Rahimi and Mosavi (2016) with the title value of financial flexibility and financial policy: empirical evidence from the firms listed on the stock exchange, the method used is multivariate regression and estimation of the least-squares method. The results explained that the value of financial flexibility has a significant inverse relationship with the company's dividend payments, financial leverage, and changes in its cash balance. The results also show companies that give more value to their financial flexibility have lower dividend payments, prefer to pay off shares by paying dividends, have lower leverage ratios, and tend to raise more money. Daneshfar et al. (2016) titled the effect of financial flexibility companies listed on the stock exchange capital structure decisions. The method used is regression. The results showed that all cash mar-Testing the factors that affect company performance Calculation of debt service coverage ratio Analysis of the impact of external and internal factors on the coal company debt service coverage ratio Managerial Implications

Debt Service Coverage Ratio
Coal company on the Stock Exchange in 2011-2018 Observation of the condition of the coal industry in Indonesia

Figure 5 Conceptual Research Framework
Information : : Relationship : Process : The scope of which will be examined ---------ginal value variables, flexibility values, and leverage ratios, had a direct and significant relationship to capital structure decisions.

Conceptual Research Framework
Based on the formulation of the problem and the purpose of the study, the conceptual framework is presented in Figure 5. The research objective is to analyze the condition of the debt service coverage ratio, the factors that affect the company's performance, and the impact of external and internal factors on the debt service coverage ratio of coal companies registered at Indonesia Stock Exchange 2011-2018.

Research Approach
The study uses two approaches namely descriptive and econometric approaches. Descriptive ap-proach to explaining the debt service coverage ratio. An econometric approach to finding out the factors that influence and the impact of external and internal factors on the debt service coverage ratio of coal companies.

Data Types and Sources
The

Data analysis Model Specifications
The diagram of the relationship between variables in the Coal Company Debt Service Coverage Ratio Model is presented in Figure 4.

Estimation and Simulation Methods
The coal service debt ratio coverage model is estimated using the Statistical Analysis System / Econometric Time Series (SAS / ETS) software, with the following stages: 1. Before the parameter estimation stage, each structural equation in the model needs to be identified. The result of model identification is Over Identified and the model is estimated using the Two-Stage Least Squares (2SLS) method. 2. Before the simulation stage impacts of external and internal factors, the model is validated using Theil's Inequality Coefficient (U-Theil) criteria

Simulation Scenarios
Simulation scenarios for the impact of external factors on China's gross domestic product, domestic market obligation, and domestic coal prices. The impact of internal factors of cost of production, general and administrative expenses, sales and marketing expenses, and capital expenditure on the coal companies' debt service coverage ratio are: S1: In the condition of China's gross domestic product, it drops by 0.1% which is anticipated by lowering the cost of production, general and administrative expenses, selling and marketing expenses, and capital expenditure by 20%.

RESULTS AND DISCUSSION Condition of Debt Service Coverage Ratio of Coal Companies
The condition of the debt service coverage ratio of coal companies is presented in Table 4. Coal companies with a debt service coverage ratio above 1.20 have the financial flexibility and coal companies with a debt service coverage ratio below 1.  Internal factors that cause coal companies to have the financial flexibility and do not have are companies that have a debt service coverage ratio below 1.20, in general, have an average DER greater than other coal companies. This is in accordance with the research of Hochmuth (2010) companies that use low leverage funds have the ability of financial flexibility. From the discussion, it can be concluded that companies that use external funding with low debt have high financial flexibility compared to companies that have high debt. Daneshfar et al. (2016) the value of flexibility and leverage ratio, has a direct and significant relationship to capital structure decisions.

Coal Company Debt Service Coverage Ratio Estimation Results
The debt service coverage ratio model of coal companies in the study was built from 18 equations, consisting of 7 behavioral equations and 11 identity equations. The model goes through several stages of model respecification. In general, all explanatory variables included in the behavioral equation have signs that match expectations, especially as seen from economic theory. The statistical criteria commonly used in evaluating the estimation results of the model are quite convincing.

Results of the Coal Company Financial Flexibility Model Validation
The results of the validation of the debt service coverage ratio model of the coal company showed 67.00% of the variables had U-Theil values below 0.50 and 33.00% values above 0.50. This shows that during the observation period namely 2011-2018 the predictive value of endogenous variables is good enough to be used for simulation models.

Impact of External and Internal Factors on Debt Service Coverage Ratio of Coal Companies
The impact of external and internal factors on the coal company debt service coverage ratio is presented in Table 5.  Based on Table 5, Simulation 1 (S1) on the condition of China's gross domestic product fell by 0.1% which is anticipated by lowering the cost of production, general and administrative expenses, selling and marketing expenses, and capital expenditure by 20% increasing debt service coverage ratio of coal companies 0.0040%. Simulation 2 (S2) on the government domestic market obligation policy conditions, the number of domestic sales plus 4.5 million tons/ year at the prevailing price level has an impact on increasing the debt service coverage ratio of coal companies 3,2344%. Simulation 3 (S3) on the conditions of the domestic market obligation policy, the number of domestic sales plus 4.5 million tons/year and the domestic coal price set by the government of 70 USD / year has an impact on increasing the debt service coverage ratio of coal companies at 1,2367%. Simulation 4 (S4) on the domestic market obligation policy conditions, the number of domestic sales plus 4.5 million tons/year, and the proposed domestic coal price of the company at 80 USD / year has an impact on increasing the debt service coverage ratio of coal companies by 2,0175%.

MANAGERIAL IMPLICATION
To increase the debt service coverage ratio of coal companies on the condition that (1) China's gross domestic product falls, (2) domestic coal prices are set by the government, the company is advised to reduce the cost of production, general and administrative expenses, sales and marketing expenses, and capital expenditure by doing company efficiency. The efficiency of the cost of production by reducing the stripping ratio, which is done by accurate mine planning requires accurate geological data obtained from detailed exploration and mapping to produce an effective and efficient mining process. The efficiency of capital expenditure by prioritizing the procurement of capital expenditure directly related to production, such as heavy equipment and crushing machines. The Byan Resources Tbk (BYAN) company that has a high debt ratio is expected to reduce its debt by obtaining cash deposits by adding contracts with vendors. The company Adaro Energy Tbk (ADRO), Indika Energi Tbk (INDY), and PT Tambang Batubara Bukit