(June 3): Danantara, the Indonesian sovereign wealth fund that has emerged to take an outsized role in Southeast Asia’s largest economy, has hired banks for a potential dollar bond sale, testing investor appetite amid economic headwinds.
Indonesia’s President Prabowo Subianto established Danantara last year in a bid to improve the efficiency of Indonesia’s powerful state-owned enterprises and to attract foreign capital into high-impact projects. The fund, which boasts assets of about US$1 trillion, was at the centre of Prabowo’s surprise announcement last month to centralise exports of key commodities. A unit of Danantara was designated as the sole export channel for coal, palm oil and ferroalloys.
Danantara hired banks to arrange a series of fixed-income investor meetings and calls in Asia, Europe and the US starting Wednesday, according to people familiar with the matter, who asked not to be identified discussing private matters. Danantara didn’t immediately respond to requests for comment.
The potential offering comes amid the growing concern among investors about some of Prabowo's growth initiatives after Moody’s and Fitch Ratings both cut their credit outlooks for the nation to negative. Prabowo said earlier this year that he would like Danantara to achieve at least a 5% return on assets, or US$50 billion a year based on its self-estimated total assets.
In the bond offering memorandum, Danantara said the “government is not guaranteeing” any of its obligations in respect of the notes. Proceeds from the offering will be used for general corporate purposes, including investments and refinancing of outstanding borrowings, according to the document.
Danantara hired Citigroup, DBS Bank, HSBC, Mandiri Securities and Standard Chartered Bank as joint lead managers and joint bookrunners to arrange the fixed-income investor meetings and calls, according to people familiar. The notes would be offered via Danantara Investment Management, the investment arm of the wealth fund. The mandate does not mean a deal will be concluded.
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S&P Global Ratings assigned DIM a BBB rating on Wednesday, the same as the sovereign, citing an “almost certain likelihood that the Indonesian government would provide timely and sufficient extraordinary support to the company in times of need".
Danantara’s latest fundraising plan follows a controversial move last year to tap 50 trillion rupiah from the country’s tycoons via the so-called "patriot bonds", an instrument paying a coupon of 2%, far below market yields. It said that it would follow up on that bond sale via another such offering before later delaying the plan.
Danantara earlier this year also secured a three-year loan equivalent to US$1 billion, paying more than double for the money than it did with the patriot bonds.
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