10 foreign fund managers eye Indonesia's debt market

JAKARTA (JP): Ten foreign fund managers with some US$5 billion in investment funds are on a visit here to take a closer look at the Indonesian debt market, a senior executive at a local investment firm said on Monday.

Indonesian Recovery Company Limited (IRCL) director Felix H. Parlindungan said the investors sought opportunities in what he called "distressed debts".

"The investors we invited are not those you read about in the papers, those who are jittery about Indonesia. We have invited investors who are used to playing in countries with high risks and high yields," Felix said on the sidelines of a meeting with the investors.

IRCL is holding a two-day conference with international fund managers to introduce them to the Indonesian debt market.

Felix said these fund managers focused on investment opportunities in distressed debts -- debts in difficult economies.

"When economies in South America and Russia began to rebound they started to look at other emerging markets, so we invited them here," Felix explained.

The 10 fund managers, mainly from Europe and the United States of America, include Exotix Limited, Spinnaker, Travelers Group, Shimoda, VR Group, the Thames River Capital, HBK Investments, PT BNP Prime Peregrine and Batavia Investment Management Ltd.

"We always think our competitors are Malaysia, the Philippines and Thailand, while they should be countries like Russia, Mexico, Albania, Rumania," Felix said.

At present, he said, large investment firms were too prudent to invest in Indonesia, so that the country must look at investors specializing in distressed debts.

"Our task is to bring them (the 10 investors) here and then show them companies worth investing in," he explained.

The conference, which is closed to the media, features presentations from, among others, the Indonesian Bank Restructuring Agency (IBRA), Bank Central Asia, Bank Danamon, PT Holdiko Perkasa and the Jakarta Initiative Task Force.

Peter J. Bartlett of the London-based Exotix Limited described the investors he was representing as "near virgins" when it came to the Indonesian market.

He said his clients in particular had investments in the Russian debt market, which they entered when the market was at its bottom.

According to him, as the Russian market was improving some investors were reporting a rate of return of up to 800 percent.

"Investing in distressed companies' bonds is one of the most interesting situations here in Indonesia," Robert Appleby, director of IRCL and its parent company Asia Debt Management, said.

What most investors failed to see were the opportunities that lie in distressed companies, he went on.

Appleby said investors expected on average a 20 percent to 25 percent rate of return per annum when investing in Indonesia.

Investment firms could earn a hefty margin on distressed debts, once companies recover or pay their debts in full.

Appleby cited signs of economic recovery at a grassroots level that were hardly noticed by foreign investors.

"When investors come to Indonesia they should get a good grassroots feeling about what is going on here and secondly a better understanding of IBRA and of unlocking its value," he explained.

He said the single most important pool of assets in Indonesia was IBRA.

"Unlocking IBRA and understanding the road map in IBRA is one of the most complicated tasks, but I think potentially to be the most rewarding," he said.

IBRA has taken over assets worth Rp 600 trillion ($72 billion) from debtor companies and closed and nationalized banks.

Appleby said since the crisis began in 1997, creditors and debtors had become more flexible in negotiating debt restructuring.

"All banks wanted their money back, plus interest, plus interest on interest, it just wasn't going to happen," he said.

Only recently, debt restructuring deals involving debt-to- equity swaps, debt-to-assets swaps or debt-to-debt were gaining ground, he said.

Because of the long and complicated debt restructuring process, many creditors, corporate managers and shareholders had become tired of it.

"On the company level, I think we're going to see a great deal of more restructuring deals by the end of this year," he said.

IRCL, a joint venture between PT Bhakti Investama and Hong Kong-based Asia Debt Management Limited, manages some $430 million in investment funds.

Since its founding in May 1999, the company has been involved in 25 projects in Indonesia totaling over $100 million, evenly split between the consumer, financial and multimedia sectors.(bkm)