JAKARTA (TheInsiderStories) – Minister of State Own Enterprises (SOEs), Erick Thohir, urged a number of largest state firms to issue global bonds in order to attract foreign exchange to Indonesia amid the plague of COVID-19. As quoted by local media, he had asked several SOEs with good ratings to run the plans.
“We only instructed state-owned firms with good ratings, like PT Bank Mandiri Tbk (IDX: BMRI), PT Bank Rakyat Indonesia Tbk (IDX: BBRI) and Pertamina,” Erick Thohir told media in a video conference last week.
Earlier, vice minister at the ministry, Kartika Wirjoatmodjo said, the SOEs has room to issued billion dollars of global bonds in this year. Beside the state banks and Pertamina, state-owned flight carrier PT Garuda Indonesia Tbk (IDX: GIAA) and construction firm, PT Waskita Karya Tbk (IDX: WSKT)also plans to release the global bond.
According to Bank Mandiri’ director, Darmawan Junaidi, the lender aimed to release global bond US$1.25 billion, part of the Sustainable Public Offering with an emission targets of $2 billion. One of the biggest bank in the country plans to issues the notes in the second quarter of 2020.
Then, PT Bank Tabungan Negara Tbk (IDX: BBTN) has plans to offers a junior global bonds worth of $300 million, said the director Nixon Napitupulu. The bank needs to releases the bond to strengthen its capital adequacy ratio to level of 19 percent in this year. This is the first global global bond instrument by the state lender.
The oil and gas holding, PT Pertamina also plans to issue global bond stagily with total amount $10 billion. Last January, the oil and gas holding has issued $1.5 billion with two tenures 10 and 30 years with coupon rate 3.10 percent and 4.175 percent, respectively.
While, Garuda Indonesia needs to issue global bonds to refinances part of debts. The aviation company has a debt maturing $500 million in 2020. The debt was released in 2015.
Last year, Moody’s Investors Service has warned that Indonesia and India are very vulnerable to the potential decline in the company’ debt repayment ability.
“Our stress test – which assumes a 25 percent decline in EBITDA – shows banks in India and Indonesia are most prone to a deterioration in corporate debt repayment capacity, followed by banks in Singapore, Malaysia and China,” says Rebaca Tan, a Moody’s Assistant Vice President and Analyst.
She also rated, the corporate default rates in Asia Pacific have been low so far, helped by low interest rates and favorable financing conditions. However, the intensifying trade and geopolitical tensions are weighing on the global economy and supply chains amid already slowing growth, she adds.
“Moody’s assumed banks in India and Indonesia are most prone to deterioration of corporates’ debt repayment capacity, followed by Singapore, Malaysia and China,” said the analyst.
Total corporate debt across the 13 economies covered by Moody’s report grew only 1 percent year over year in US Dollar terms at the end of 2018, the slowest pace since the global financial crisis. Yet, overall corporate leverage remains high relative to GDP in many of the region’ economies.
Moreover, outstanding debt is heavily concentrated among corporates that hold debt more than four times EBITDA, raising the risk of rising defaults as operating conditions weaken. Somewhat mitigating these risks are the strong buffers kept by most Asia Pacific banks, in the form of both loan loss reserves and capital, to withstand a sharp deterioration in asset quality.
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