Bank Indonesia’s new requirements for
corporate borrowers of foreign currency-denominated debt will
impact corporate access to offshore financing. In particular it
will affect the high-yield bond market.
The regulations were released on October 30, and
require Indonesian corporate borrowers of foreign currency debt
to take steps to manage their currency risk. Foreign currency
borrowers must also have an onshore rating equal to or higher
Borrowers most affected will likely be those in the
high-yield space. While they will likely achieve the minimum
rating required, hedging may not be necessary for some
companies. And this may affect the ability of new borrowers to
access the market.
Regardless, they cannot be ignored. Joel Hogarth, partner at
Ashurst, cites reports reassuring clients over the regulations
because there are merely...