Indonesia sells Asia's very first 50-year dollar bond to fight Coronavirus pandemic

Asian life insurers, especially which are based in Taiwan as well as US fund managers, were the largest investors, as per two sources with direct knowledge of the matter

Indonesia has raised $4.3 billion, which include the longest-dated US dollar bond ever that got issued by an Asian nation, for helping the government in funding the battle against the coronavirus or COVID-19, the finance minister of the country said.

The deal got finalised in the US on Monday and sold in maturities of 10.5 years and 30.5 years which is worth $1.65 billion each, along with a 50-year tranche that is worth $1 billion.

It was Indonesia's largest-ever bond, according to a term sheet reviewed by Reuters, which showed Indonesia will use the cash raised to partly "fund its COVID-19 relief and recovery efforts".

Asian life insurers were the largest investors

US Dollar
US Dollar Pixabay

"We took the opportunity for the 50-year bonds because investor preferences for long-term maturities were very strong," Indonesia Finance Minister Sri Mulyani Indrawati told reporters later on Tuesday. The 50-year bonds were priced with 4.5 percent coupon rate, which she said is lower than coupon rate priced for a 10-year government bond issued by Indonesia in 2018.

Asian life insurers, especially some based in Taiwan as well as US fund managers, were the largest investors, according to two sources with direct knowledge of the matter. The sources could not be named because they were not authorised to speak to media. "The mood in the market is starting to feel better, investors are starting to think we could be moving towards the end of the tunnel," a banker working on the deal said.

Deal was carried out virtually

The deal was carried out virtually, with bankers working on the transaction unable to travel to Jakarta, which would have been the normal practice. Indrawati said the proceed of the bond sales would also help increase foreign exchange reserves at Bank Indonesia, which has seen a drop of $9.4 billion in March to $121 billion as the central bank used some of its reserves to defend the rupiah.

The government is also in talks with a number of multilateral banks to secure loans totalling $7 billion to help finance its COVID-19 relief efforts. Indonesia's coronavirus cases stood at 2,738 on Tuesday, with 221 confirmed deaths - the highest number of fatalities in Asia outside China.

Fifty-year bond deals priced in local currencies have been held in the past, Refinitiv data showed. South Korea raised 1.1 trillion won through a 50-year bond in September 2016 that at the time was worth $1 billion. Indonesia's government said on Monday it had raised its estimated 2020 net bond issuance to 549.6 trillion rupiah ($33.55 billion) to cover the country's widening fiscal deficit. It also listed a plan for sales of 449.9 trillion rupiah ($27.47 billion) worth of "pandemic bonds" to cover additional spending for the COVID-19 response.

(With agency inputs)

Related topics : Coronavirus