10 foreign fund managers eye Indonesia's debt market

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)