In­done­sian lend­ing boom seen taper­ing off

Lo­cal polls and pres­i­den­tial race may keep bor­row­ers on side­lines

The Star Malaysia - StarBiz - - Foreign News -

SYD­NEY: The lend­ing boom of 2017 that saw In­done­sian com­pa­nies bor­row the most ever in the syn­di­cated loan mar­ket is set to fade.

While the mar­ket re­mains healthy for now, at­ten­tion will shift to lo­cal polls in the com­ing months and a pres­i­den­tial race in 2019 that may keep bor­row­ers on the side­lines, ac­cord­ing to May­bank In­vest­ment Bank Bhd.

Is­suers have signed US$1.89bil of loans so far this year, while about US$2.8bil of deals are in the pipe­line.

“We sus­pect that things will slow down and bor­row­ers will not make any sig­nif­i­cant capex or M&As as they wait for the new pres­i­dent,” said Caro­line Teoh, man­ag­ing di­rec­tor and re­gional head of in­vest­ment bank­ing and ad­vi­sory at May­bank In­vest­ment in Kuala Lumpur.

“Mo­men­tum may start to ta­per off to­wards the end of the year.”

A de­ci­sion by S&P Global Rat­ings to lift In­done­sia out of junk sta­tus in 2017 amid an eco­nomic re­cov­ery helped spur a record US$28.9bil of loans, mark­ing a ban­ner year for syn­di­cated lend­ing.

The coun­try on Fri­day won a sovereign rat­ing up­grade from Moody’s In­vestors Ser­vice.

The na­tion’s main op­po­si­tion party on Wed­nes­day nom­i­nated for­mer gen­eral Prabowo Su­bianto to chal­lenge in­cum­bent Joko Wi­dodo in the pres­i­den­tial elec­tion, set­ting up a re­run of the 2014 race.

“Af­ter the sovereign up­grade last year, there is mo­men­tum in the In­done­sian loan mar­ket right now and that is likely to con­tinue for next few months,” be­fore slow­ing later, said Teoh.

The for­mer gen­eral ac­cepted his party’s of­fer. Nom­i­na­tions for the pres­i­den­tial race have to be fi­nalised by Au­gust this year ahead of vot­ing sched­uled for April 2019.

“In­done­sia’s mar­ket has been ac­tive with most of the bor­row­ers be­ing non-bank fi­nance com­pa­nies that need to bor­row on a rea­son­ably reg­u­lar ba­sis,” said John Cor­rin, global head of loan syn­di­ca­tions at Aus­tralia and New Zealand Bank­ing Group in Hong Kong.

At the mo­ment, for­eign cur­rency loans are at­trac­tive for bor­row­ers, he said.

In­done­sia Ex­im­bank cut mar­gins on its US$950mil loan cur­rently in mar­ket by up to 50 ba­sis points from its 2016 deal. MPM Fi­nance, a unit of PT Mi­tra Pi­nasthika Mustika, is of­fer­ing 150 ba­sis points mar­gin on US$200mil loan with av­er­age life of 2.125 years, com­pared with 185 ba­sis points spread on a sim­i­lar fa­cil­ity in 2017.

PT Mandiri Tu­nas Fi­nance is of­fer­ing 90 ba­sis points mar­gin on its US$100mil loan, lower than 113 ba­sis points in last year’s bor­row­ing.

In the com­ing months, bor­row­ers will be “mind­ful” of how the lo­cal and pres­i­den­tial elec­tions will fare and “what it means for the coun­try,” said Teoh at May­bank, the top bookrun­ner this year for In­done­sian loans. “Peo­ple will adopt a more of wait and see strat­egy.”

Under the spot­light: Teoh says bor­row­ers will be mind­ful of how the lo­cal and pres­i­den­tial polls will fare in the com­ing months.

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