Bring debt back to life

Author: | Published: 20 Jul 2010

Rachel Evans Asia editor

Indonesia's debt market is in trouble. While domestic offerings continue, international dollar-denominated offerings have all but dried up. In the first half of 2010, Indonesian corporates issued five significant dollar-denominated bonds, raising a modest $1.4 billion. In comparison, figures from Bloomberg show that Indonesian companies issued $3.6 billion of debt between August and December 2009 alone, with dollar-denominated debt comprising 85% of all bonds structured in this period.

In part, this is a question of supply and demand; since the start of 2010, fewer investors have wanted to buy Rule 144A Indonesian high yield. As early as January and February, bonds from Chandra Asri, Cikarang Listrindo and Star Energy required credit enhancing structures to sell. Chandra Asri, for example, boosted investor protection with maintenance-style covenants such as a debt-to-capitalisation ratio and a $50 million offshore cash cushion. Since then, market confidence has declined further...