More Bonds Issued in Indonesia after S&P Credit Rating Upgrade?
More rupiah and foreign-denominated bonds are expected to be issued in Indonesia now credit rating agency Standard & Poor's (S&P) assigned investment grade status to Indonesia's sovereign rating (BBB-/stable outlook). Yields are expected to decline gradually, while the cost of funds become cheaper. Therefore, it now becomes more attractive for the Indonesian government and local companies (those that also have been assigned the investment grade rating) to issue bonds and collect "cheaper funds".
Indonesia now having received investment grade status - implying there is less perceived risk when investing in Indonesia - opens up room for capital inflows from big conservative institutional investors from Japan and Europe.
Read more: Indonesia Gets Investment Grade Credit Rating Status from S&P
Based on data from the Indonesia Stock Exchange there are 20 bond issuance planned for 2017 (including Islamic bonds) from 19 companies with a combined value of IDR 35.17 trillion (approx. USD $2.6 billion). Considering there are also plenty of bonds that mature this year, new bonds are also a strategy to settle debt obligations. However, with Indonesia's domestic conditions relatively stable (tensions surrounding the 2017 Jakarta gubernatorial election and Ahok's blasphemy case have eased), there remain external risks that can undermine the attractiveness of Indonesian bonds (for example turmoil related to US politics, looming monetary tightening in the USA, and geopolitical risks).
In the January-April 2017 period a total of seven Indonesian companies sold foreign-denominated bonds worth a total of USD $1.9 billion, combined. One company that is ready to issue a foreign-denominated bond in the second half of 2017 is Tower Bersama Infrastructure after having received the green light from shareholders at last week's Annual General Meeting of Shareholders (for a maximum of USD $500 million). The company refrained from issuing global bonds in 2016 as market conditions were regarded not conducive. Funds generated through this corporate move will be used for the company's refinancing. Up to the first quarter of 2017 Tower Bersama Infrastructure has debts worth USD $1.4 billion (including two earlier global bond issuances).
Meanwhile, Solusi Tunas Pratama plans to sell USD $400 million of bonds (through its subsidiary Pratama Agung Pte. Ltd.) this year to boost liquidity, and Steel Pipe Industry of Indonesia plans to sell USD $250 million worth of bonds for the purpose of covering its short-term debt payments. Lastly, Soechi Lines plans to issue USD $300 million of bonds for the purpose of refinancing its debt as well as to finance the expansion of its fleet.
Foreign-Denominated Bonds Issued in January-April 2017:
|Japfa Comfeed Indonesia||5.50%||150|
|Bukit Makmur Mandiri Utama||7.75%||350|
Source: Bisnis Indonesia