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REDD Insight: Indonesian companies face shorter refinancing

window as elections loom Region:
ASIA
02 February 2023 12:05 PM | Significant Corporate Event | REDD ASIA
Country:
[The REDD Insight is a daily market comment produced by senior members of the REDD Intelligence
Indonesia
newsrooms. The views expressed in this report are solely those of the author(s) and are not
necessarily either shared or endorsed by REDD.] Companies/Issuers:
Agung Podomoro Land Tbk, PT
“All we have to decide is what to do with the time that is given us.” – Gandalf, The Fellowship of the Ring
(IDX:APLN)
Indonesian companies may face a narrower refinancing window this year as banks try to rush out
REDD Asia Commentary
their loans by 3Q23, before the election campaign kicks into full gear.

The campaign period will officially start in October 2023, running up to a general election on 14 Related Stories
February 2024, and regional polls for governors, mayors and other officials on 27 November 2024.
President Joko Widodo, who ascended to the top job in 2014, is serving his last term and cannot REDD Insight: A closer look at India's
seek re-election. prepack regime and its future ASIA

A Jakarta-based banker said that their team will likely make a “last push” to channel loans in 1H23, as Indonesia property sector may grow 5%
they expect corporate actions to slow down in 4Q23. Another local banker said that they do not see a in 2023 ASIA
major increase in loan disbursements amid the political campaign this year. “The sooner we close the
deal, the better,” according to the second banker. REDD Insight: Evaluating the proposed
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Indonesia’s Association of State-Owned Banks (Himbara) expects inflationary pressures to drag down regime ASIA
overall loan growth to around 6.39%-7.74% this year, compared with 8.91%-11.14% in 2022, the
association’s chairman, Sunarso, said last month. The association consists of Bank Mandiri, Bank REDD Insight: Is Dalian Wanda’s bond a
Rakyat Indonesia (BRI), Bank Negara Indonesia (BNI), and Bank Tabungan Negara (BTN). sign of a high-yield comeback? ASIA

The reduction of energy subsidies from the government will likely push up production costs and
erode the national income, Sunarso, who is also the President Director of BRI, told reporters.
Indonesia’s central bank is estimated to raise the benchmark seven-day reverse repo rate to 5.75%-6%
this year, from 5.5% in 2022 and 3.5% in 2021, according to his presentation.

In comparison, the country’s biggest private lender, Bank Central Asia (BCA), is still targeting loan
growth of 10%-12% this year, as reported. Despite central bank rate hikes, BCA will raise its interest
rates “very slowly, as long as there is sufficient liquidity,” President Director Jahja Setiaatmadja said.
The bank’s loans-to-deposit ratio stood at 65.2% as of end-2022, compared with 62% in end-2021.

Indonesian state-owned enterprises (SOEs) will likely aim to complete “major and crucial” corporate
actions by September, according to a source close to the presidential palace. SOE Minister Erick
Thohir has not declared his candidacy, but is widely expected to run for a high-ranking position in
the elections. “Everybody is ready to fight, even from several years ago,” the source said.

Under Indonesia's current political system, prospective presidential and vice-presidential candidates
require the support of political parties holding at least 115 seats (20% of the total) in the House of
Representatives to take part in the 2024 presidential election, according to Samuel Sekuritas.

The brokerage wrote that there are “four axes of political alliance”: 1) the Indonesian Democratic
Party of Struggle (PDIP), which is the only political party with more than 20% of total seats; 2) the
United Indonesia Coalition (KIB), consisting of the Golkar Party, the United Development Party (PPP),
and the National Mandate Party (PAN); 3) an alliance between the Gerindra Party and the National
Awakening Party (PKB); and 4) a coalition between the Nasdem Party, Democratic Party, and
Prosperous Justice Party (PKS).

Currently, only two parties have declared their support: Gerindra Party has sponsored Defense
Minister Prabowo Subianto, while Nasdem Party has endorsed former Jakarta Governor Anies
Baswedan. None of the major presidential candidates have “an absolute advantage over the others,”
Samuel Sekuritas said, citing surveys conducted by local polling agency Poltracking Indonesia.

The electability of the top two candidates, Central Java Governor Ganjar Pranowo and Subianto, has
stagnated, while Baswedan—who had the lowest initial electability—is gaining pace on his rivals,
according to Samuel Sekuritas. All major presidential candidates need a complementary vice-
presidential candidate, the broker added.

As the election campaign comes into full swing, Indonesian companies that need to refinance their
near-term debt maturities, such as property developer Agung Podomoro Land (APLN), may want to
seal their loan deals sooner rather than later.

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