Danantara's Debut Global Bond Oversubscribed Fourfold
The Investment Management Agency Daya Anagata Nusantara (BPI Danantara) recorded investor demand that far exceeded its target in its inaugural global bond issuance. From an initial target of US$1 billion, investor interest reached US$4.6 billion, prompting Danantara to increase the issuance value to US$1.5 billion.
CEO of BPI Danantara and Minister of Investment and Downstreaming/Head of BKPM, Rosan Perkasa Roeslani, stated that this achievement is tangible proof of the high level of international market confidence in Danantara and Indonesia’s economic prospects. “This also proves that investor confidence in Indonesia is high, and this is real,” Rosan said during a press conference at the Presidential Office in Jakarta on Monday (15/6).
The success was achieved after Danantara conducted a series of roadshows to several global financial centres since early June. Visits were made to Hong Kong, Singapore, Boston, London, and New York to introduce Danantara’s profile and present its ongoing investment strategy.
According to Rosan, this step was taken after Danantara obtained an investment grade rating from international rating agencies Moody’s, S&P, and Fitch. The rating obtained is even equivalent to the sovereign rating of the Government of Indonesia. Previously, Danantara also achieved the highest AAA rating from Pefindo.
Armed with these achievements, Danantara offered global bonds to international investors for the first time. The results exceeded expectations. Rosan revealed that the Danantara team met with around 122 investors from various countries during the roadshow. After the meeting and market sounding process, the interest received through book building reached more than four times the initial target.
Seeing the high demand, Danantara ultimately increased the issuance value to US$1.5 billion, divided into 5-year and 10-year tenors. The success was also reflected in the coupon rates obtained. For the 5-year tenor bonds, Danantara closed the transaction at an interest rate of 5.35%. Meanwhile, the 10-year tenor bonds were set at 5.95%.
Previously, financial market conditions were considered less than ideal. At that time, the domestic stock market was under pressure and the rupiah exchange rate was also weakening, leading many to question the timing of the bond issuance. However, the high investor demand resulted in funding costs that were actually more competitive than initial estimates. “If they did not trust us, they would certainly ask for a very high yield premium. They did not ask for that yield; in fact, we see the yield is very, very competitive,” Rosan said.
He explained that the bond issuance process has entered the final stage. The signing was carried out on 11 June and the proceeds from the issuance are scheduled to enter Danantara’s coffers on 18 June. According to Rosan, this success also answers the doubts of several parties who previously questioned Danantara’s ability to attract global investors, given that the institution is still relatively new. “Danantara is also only one and a half years old. But we can issue bonds with such high confidence,” he said.
The investor composition shows the dominance of investors from the United States. For the five-year tenor bonds, 38% of investors came from the United States, 41% from Europe and the Middle East, and 21% from Asia. Meanwhile, for the 10-year tenor, investors from the United States reached 52%, followed by Europe and the Middle East at 31%, and Asia at 17%. Rosan considered this composition quite interesting because it differs from the trend of previous Indonesian bond issuances, which were generally dominated by Asian investors. “In fact, the largest enthusiasts and buyers are from the United States. Especially for the 10-year, 52% who subscribed to our bonds are from the United States,” he said.
The high investor interest also opens up opportunities for Danantara to issue bonds with longer tenors in the future. Rosan revealed that a number of investors even expressed their readiness if Danantara were to issue bonds up to a 30-year tenor. According to him, this interest arises because investors see that Indonesia’s economic fundamentals remain strong and have stable growth prospects amidst global geopolitical and geo-economic challenges.
The success of Danantara’s first bond also attracted the attention of international media. Rosan mentioned that several media outlets, including Bloomberg, highlighted the strong investor demand for the debt securities and assessed it as a positive signal for the administration of President Prabowo Subianto.
Rosan assessed that this achievement is an important milestone for Danantara. Besides being the first global bond issuance, the results obtained are also considered equivalent to, or even more competitive than, several other sovereign wealth funds in terms of yield. “This proves that Danantara, in this case, has good credibility and this is reflected in the bonds that were oversubscribed by more than three times,” concluded Rosan.