Danantara gets US$1 billion loan at double cost of ‘patriot bonds’
The loan comes just as global investor attention is riveted on Indonesia
[JAKARTA] Indonesian sovereign wealth fund Danantara has secured a loan equivalent to US$1 billion, people familiar with the matter said, paying more than double for the money than it did with its so-called patriot bonds.
The three-year loan – which allows drawdowns in several currencies – offers an interest margin of 95 basis points above the US Secured Overnight Financing Rate for the US dollar tranche, translating into about 4.61 per cent at current levels. That means Danantara is paying more than twice the 2 per cent coupon on its five- and seven-year patriot bonds that it previously issued to Indonesia’s richest families.
The loan comes just as global investor attention is riveted on Indonesia, where the worst stock rout since 1998 is making it the latest in a growing list of sources of instability in money managers’ portfolios.
While Danantara had already been lining up the loan for several months, its completion around the time of the equity meltdown underscores broader challenges ahead. President Prabowo Subianto views the newly established fund as central to his ambition of restoring economic growth to around 8 per cent – levels last seen in the mid-1990s.
There was no immediate reply from Danantara to a request for comment.
Danantara had approached banks last year for as much as US$10 billion – a deal that would have been South-east Asia’s largest loan. The fund initially shortlisted Natixis, DBS Group Holdings, HSBC Holdings, and Standard Chartered as coordinators, though Natixis later withdrew. UOB ended up joining the group.
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It wound up deciding to raise only the US$1 billion, and kept the loan to that size despite the fact that about 29 banks joined.
The borrowing marks the first major sign of just how much more Danantara has to pay for money from global lenders than from the Indonesian tycoons who bought the patriot bonds.
The fund raised 50 trillion rupiah (S$3.8 billion) from those securities late last year, at yields it had acknowledged were below market levels. Danantara had previously explained its view on the programme, saying that with the securities “our business leaders trade short-term gains for a lasting legacy: building our nation.”
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The fund is planning a fresh round of patriot bonds to raise 20 trillion rupiah, which its chief investment officer said last week will be “coming soon.”
Danantara executives say the fund oversees nearly 900 state-owned enterprises, with assets totalling about US$1 trillion, making it one of the world’s largest sovereign wealth funds. BLOOMBERG
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