Indonesia's state-owned company sells $ 5.5 billion in bonds to finance stock purchase, Business News & Top Stories


Indonesian state mining company Inalum has sold $ 4 billion ($ 5.5 billion) in securities to finance the acquisition of a majority stake in Indonesia-based Freeport-McMoRan's gold and copper mining unit. U.S.

The agreement will pave the way for President Joko Widodo to keep his promise to gain more control over the country's natural resources, fueling nationalist sentiment as he prepares for the upcoming April elections. Mr. Joko is seeking a second and final five-year term in office.

The securities were sold in four tranches: US $ 1 billion of three-year securities with a yield of 5.5%; US $ 1.25 billion (five years, 6%); US $ 1 billion (10 years, 6.875% and US $ 750 million (30 years, 7.375%).

The bidders offered to buy about four times the amount offered, said a government official who was involved in the sale process to The Straits Times.

The fact that Inalum securities were oversupplied and recovering in the secondary market immediately after the sale indicated that the initial sale of securities offered excessively attractive returns, analysts said. The joint global coordinators for the sale were BNP Paribas, Citi and MUFG.

On September 27, the Indonesian government signed an agreement to acquire a majority stake in Freeport Indonesia, which runs one of the world's largest gold and copper mines in Papua province.

The deal, a record acquisition in Indonesia, could be favorable to Joko before the legislative and presidential elections on April 17 next year.

Freeport entered Indonesia in the 1960s, at the time of a shift in the leadership of founding President Sukarno to Suharto.

It began to develop the Grasberg mine in the early 1970s. With the country then facing a lack of infrastructure development, few industries and a government without money, the Freeport contract helped to improve the economy.

But politicians and observers are increasingly questioning the terms of the deal, seen as more favorable to the company than to Indonesia.

The sale of Inalum bonds – the largest dollar-denominated corporate guarantee of a non-financial issuer in the country and among the largest in the Asian market this year, according to Bloomberg data – comes after state-owned state oil company Pertamina was able to shell out $ 750 million offers of securities.

Bloomberg reported that the Asian bond market, which was relatively quiet earlier this week, before the US election resurfaced yesterday. There is also speculation that trade tensions between the US and China could ease.

"Risk appetite is better now that uncertainty is out of the way after the mid-term elections," Bloomberg said, citing Singapore-based senior fund manager Leo Hu of NN Investment Partners.

"The market is recovering in anticipation of the easing of trade tensions. We believe the ties between China and the United States are warming and there is potential for a ceasefire."

Sentiment about emerging market debt also improved on expectations that an impasse in Washington – with Democrats now in control of the US House of Representatives – would reduce the strengthening of the US dollar.


Source link