Indonesia’s new hedging rules explained

Author: Ashley Lee | Published: 20 Nov 2014

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 than BB.

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...