Gulf Times

Sunday, July 5, 2020 3

BUSINESS
China
Google, Temasek in talks convertible
bond hype
sees $624bn

to invest in Tokopedia hunt for each

of this year’s
57 deals
Bloomberg
Singapore
Bloomberg
Beijing

G
oogle and Temasek Hold-
ings are in negotiations to join

a funding round of between
$500mn and $1bn for Indonesian e-
commerce giant PT Tokopedia, ac-
cording to people familiar with the
matter.
Tokopedia, the online marketplace
backed by SoftBank Group Corp’s Vi-
sion Fund, has held talks with US In-
ternet giants including Facebook Inc,
Microsoft Corp and Amazon.com Inc,
the people said.
But Google and Temasek have been
more active in their negotiations and
those talks may conclude in com-
ing weeks, they said, asking not to be
identified because the discussions are
private.
America’s largest Internet corpo-
rations have looked increasingly to-
wards Asia as growth in the US and
Europe slows, seeking to tap the re-
gion’s rapidly growing smartphone-
savvy population.
Facebook is buying a stake in India’s
Jio Platforms, while its WhatsApp
unit struck a deal last month to invest
in ride-hailing and food delivery giant
Gojek. Representatives for Tokopedia
and Temasek declined to comment.
Google didn’t respond to an e-mail
seeking comment.
The backing of Alphabet’s Google
and Singaporean state investment
firm Temasek would mark a major
boost for one of Southeast Asia’s big-
gest e-commerce operators.
Tokopedia co-founder and chief
executive officer William Tanuwi-
jaya built the country’s most valuable
startup after Gojek after scoring early
backing from SoftBank founder Masa-
yoshi Son and Alibaba Group Holding
Ltd co-founder Jack Ma.
It now plans to list shares at home
as well as in another as-yet-undecid-
ed location, Tanuwijaya told Bloomb-
Employees work in front of computers at PT Tokopedia’s office in Jakarta. Tokopedia co-founder and chief executive officer William Tanuwijaya built the country’s most
valuable startup after Gojek after scoring early backing from SoftBank founder Masayoshi Son and Alibaba Group Holding co-founder Jack Ma.
erg News in October. Tokopedia came
close to finalising its latest financing
this year before news emerged of a re-
cent data theft attempt that may have
affected 15mn of its users, one of the
people said.
It was also held back by the Cov-
id-19 pandemic, which is rapidly
changing the online shopping land-
scape in the world’s fourth most pop-
ulous nation.
E-commerce platforms are now
moving quickly to serve the millions
of people forced to make their first
online purchases during widespread
lockdowns.
Singapore-based rival Shopee – a
unit of Sea Ltd – is catching up, while
Alibaba last month appointed a long-
time veteran to head up Lazada and
“fight harder” as competition heats
up.Indonesia has become a key bat-
tleground between the regional rivals:
The country’s e-commerce market
is projected to expand from $21bn in
2019 to $82bn by 2025, according to a
recent study by Google, Temasek and
Bain & Co.
A
hunt for returns in China
is triggering the biggest
stampede into converti-
ble bonds since before the global
financial crisis.
Investors seized the chance
to take part in Shanghai Weaver
Network Co’s bond sale in June,
with the deal about 170,600
times oversubscribed – the
highest level since at least 2007,
according to East Money Infor-
mation Co’s website.
The average retail subscrip-
tion amount for each of this
year’s 57 deals through May was
4.41tn yuan ($624bn), Haitong
Securities Co analysts wrote in a
recent note.
That was about seven times
more than in the first half of last
year, according to the analysts’
data.
After regulators last year
moved to cool a frenzy for con-
vertible bonds, China’s ultra-
low interest rates and this year’s
plentiful liquidity are again fuel-
ling demand.
The increasingly speculative
nature of the market is apparent
amid concern China may soon
witness its first convertible-
bond default.
Wild swings in some convert-
ible bonds prompted closer reg-
ulatory scrutiny earlier this year.
In two offerings sold on
Thursday, YingTong Telecom-
munication Co saw the book
114,100 times covered, while
Shandong Dawn Polymer Co’s
notes were 90,175 times over-
subscribed, according to their
filings late Thursday.
“Convertible bonds meet the
needs of the market amid de-
clining bond yields,” said He
Qian, a fund manager at HFT In-
vestment Management Co, who

S&P sees no imminent risk to Indonesia rating from debt plan
Bloomberg deficit with the central bank will weak-
Jakarta en its independence and trigger rating
downgrades.
The cost of protecting Indonesia’s
response to questions. “This is no dif-
ferent from the situation that the bank
faces in its ordinary course of mon-
etary operations.”
says more companies will tap the
market given the relatively cheap
funding available. “For fixed-
income investors in the second
half of the year, it will be a key
source of outsized returns.” Av-
erage first-day gains in April and
May were 16% and 15% respec-

T
he Indonesian government’s
plan to sell billions of dollars of
bonds to the central bank to fi-
nance a widening fiscal deficit poses no
immediate threat to the nation’s credit
rating, according to S&P Global Rat-
ings. S&P, which already has a negative
outlook on Indonesia’s rating, makes
no distinction between the debt issued
by the government, be it to the central
bank or to commercial investors, in as-
sessing its fiscal impact, according to
Kim Eng Tan, a sovereign analyst.
Moody’s Investor Service said sepa-
rately that inflation is well-anchored
in Indonesia and the credit outlook
would depend on debt duration and
other constraints.
“Unless there are material and un-
foreseen economic or financial disrup-
tions, we do not believe that this plan
will affect the credit metrics more than
we currently expect,” Tan said.
S&P recently downgraded its out-
look on Indonesia’s BBB rating, the
second-lowest investment grade
score, because of the expected fiscal
deterioration brought about by Cov-
A man walks past an entrance to the Bank Indonesia headquarters in Jakarta. Under the id-19. Indonesia’s currency tumbled
deficit financing proposals, Bank Indonesia may buy bonds worth 574.4tn rupiah ($40bn) 2.1% this week on concern the plan
to fund the government’s pandemic response, according to the finance ministry. to split the cost of funding the budget
five-year dollar bonds, or credit-de-
fault swaps, slid 14 basis points this
week, the most in a month.
The so-called burden-sharing plan
is under “tough discussion” by the
government and Bank Indonesia to
ensure a prudent plan that maintains
both monetary independence and fis-
cal integrity, a senior finance ministry
official said Friday.
Under the deficit financing propos-
als, Bank Indonesia may buy bonds
worth 574.4tn rupiah ($40bn) to fund
the government’s pandemic response,
according to the finance ministry.
President Joko Widodo’s adminis-
tration needs to borrow 1.65 quadril-
lion rupiah this year to fund a budget
deficit of 6.34% of gross domestic
product and repay its debts.
While some economists have argued
the deficit funding may impact infla-
tion and money supply in the long run,
S&P’s Tan said the size of the program
wasn’t large enough to materially af-
fect monetary operations.
“The impact of inflation, which
recently fell below 2%, will depend
partly on how much Bank Indonesia
offsets the liquidity impact of its bond
purchases,” Tan said in an e-mailed
For Moody’s, what will influence its
rating decision will be “the duration
and other binding constraints under
which the measures are extended,”
Anushka Shah, a senior analyst in
Singapore, said in an e-mail. That “in
turn would determine the scope and
extent of their usage as a lever to in-
crease fiscal expenditure beyond what
is deemed necessary for economic re-
covery and rehabilitation,” she said.
Indonesia is rated Baa2 at Moody’s,
equivalent to S&P’s rating.
While the stimulus measures an-
nounced by Indonesia’s government
will have some effect on fiscal and debt
metrics, the impact will not be mark-
edly different from the likely deteriora-
tion in other regions, Shah said.
Southeast Asia’s largest economy
entered the crisis with comparatively
strong fiscal buffers, providing it some
fiscal space to react, she said.
“Like many emerging markets glo-
bally, BI’s move towards unconven-
tional quantitative easing represents
one way for the government to fund
its wider borrowing requirements in
the wake of higher coronavirus-relat-
ed spending and stimulus measures,”
Shah said.
tively, compared to 9.4% in the
first half of last year, according
to Haitong.
Investors typically bet on the
securities for potential gains on
the equity conversion.
When a company sells a con-
vertible, existing shareholders
have the right to participate in
the deal to avoid dilution.
And unlike most equity offer-
ings, the bonds don’t have lock-
up requirements.
That means insiders can sell as
soon as the first day of trading.
Convertible bond offerings in
China are usually hundreds or
even thousands of times over-
subscribed given limited supply
compared to other types of se-
curities, such as corporate bonds
or stocks.
Investors don’t have to pay the
full amount of their bids until
after they get their allocation.
A key difference in this year’s
frenzy is that smaller and lower-
rated issuers have dominated the
primary market in the first half,
prompting some caution from
analysts.

Wirecard’s missing executive and his alleged role in India deals

Bloomberg
London
A pair of Indian lawsuits allege Wirecard
AG’s former chief operating officer played
a central role in deals that were later
mired in disputes over valuations and
unpaid fees.
In one of the civil cases, the previous
owners of Indian payments company
Hermes I-Tickets Private Ltc, are suing
former COO Jan Marsalek alongside
Wirecard over allegations it made false
claims about how much it paid to them at
the time.
The suit alleges Marsalek took part in
negotiations leading to the acquisition
of Hermes by a Mauritius-based private
equity fund called Emerging Market
Investment Fund in 2015.
The second case, for unpaid consul-
tancy fees, is against the Mauritian fund
EMIF, which acquired a majority stake in
Indian travel firm Goomo Orbit and al-
leges Marsalek played a central role in ne-
gotiating that deal. A lawyer for Marsalek
based in Munich declined to comment on
the cases or discuss his client.
A Wirecard spokesperson declined to
comment. Meanwhile Marsalek’s wherea-
bouts are unknown.
Authorities in the Philippines say he
may have passed through the country be-
fore boarding a flight to China on June 24.
However, they are also investigating
whether immigration documents showing
he entered the Philippines were fake, Dow
Jones reported on Friday.
Wirecard was tipped into a full-blown
accounting scandal and filed for insol-
vency with a German court after disclos-
ing last month that €1.9bn ($2.1bn) were
missing from its balance sheet.
The lawsuits offer a glimpse into the
complexity of the task facing investiga-
tors trying to decipher the finances of
a company with divisions and interests
across the globe, and establish what role
senior management figures played in
the events leading up to Wirecard’s in-
solvency. Wirecard is also under scrutiny
by authorities in jurisdictions including
Singapore, Germany and the UK.
Meanwhile, Mauritius authorities
have started investigating a possible
round-tripping case linked to Wirecard,
according to a statement by regulators on
Wednesday.
The civil cases describe Marsalek as
linked to EMIF and allege that the execu-
tive was directly involved in negotiations
ahead of transactions that have since
been questioned by analysts over their
opacity and discrepancy of valuations.
Marsalek, was fired in June after Wire-
card disclosed about four fifths of its net
cash was missing from its balance sheet.
There’s no suggestion of any personal
responsibility for the shortfall on Mar-
salek’s part. EMIF bought Indian travel
firm Goomo Orbit in 2015 and its founder
Rupen Vikamsey is suing the fund for an
advisory fee he says he’s owed for his
work after the deal.
Marsalek was involved in negotiations
between Orbit and EMIF, the lawsuit
alleges. Wirecard has previously said it
had no involvement in EMIF until it later
bought assets from the fund.
Wirecard has never had any direct or
indirect relationship with the fund other
than negotiating the deal to acquire
assets from EMIF, the company said in
response to questions raised by online
portal the Foundation for Financial Jour-
nalism about the Hermes deal.
Vikamsey filed a mediation application
in Mumbai in March – a step required in
commercial cases before they can be
seen by a court – reiterating the claim that
he’s owed advisory fees from the EMIF
deal. “I always felt like I was negotiating
with Wirecard,” Vikamsey said in a phone
interview with Bloomberg News.
The suit – which is pending before
a High Court in Mumbai – alleges that
Vikamsey and his partner Balasundaram
Kumar were not compensated by EMIF
for an “advisory services fee” which made
the deal financially lucrative and was ulti-
mately the determining factor for them to
sell most of Goomo Orbit to the fund.
Since Marsalek’s exit from Wirecard,
Vikamsey filed an additional document to
the court stating that EMIF was acting as
an intermediary for Wirecard to acquire
Indian companies.
Vikamsey and his partner are not suing
Wirecard.
That case follows the suit filed last year
in Chennai, India against Wirecard, Mar-
salek, EMIF and three other defendants
that’s centered on a dispute over how
much Wirecard paid for Hermes I-Tickets
Private Ltd in a 2015 deal.
Wirecard said in public disclosures it
paid more than $300mn for Hermes and
invested in a smaller unit.
The case was brought by Hermes’s
former owners at GI Retail who allege
they sold the company for a fraction
of the price to EMIF weeks before the
Wirecard deal.
The Chennai case alleges Marsalek
took part in exchanges that initiated the
sale of Hermes to EMIF.
GI Retail’s owners, brothers Ramu and
Palaniyapan Ramasamy, were themselves
sued in London over the deal by Hermes’s
minority shareholders. They said they
were compensated based on a purchase
price of $40mn and should be paid using
the higher valuation. Judges are currently
debating whether the case should be
heard in Chennai. Marsalek, meanwhile,
remains out of sight.
Philippines Justice Secretary Menardo
Guevarra told Bloomberg News he may
have passed through the country last
week and government immigration
databases show he arrived in Manila on
June 23 before departing for China the
next day.