Indonesia Infrastructure Finance seeks maiden bond

Government and multilateral-owned infrastructure financing arm hopes to boost its asset base by raising funds from the international bond market.

PT Indonesia Infrastructure Finance (IIF) is hoping to launch its maiden international bond offering as it seeks to build up its asset base to $1 billion over the next couple of years. 

The partially state-owned group was established in 2010 as a catalyst and conduit to boost infrastructure development in the country.

Progress since it finally became operational in 2012 has not been as fast as expected but the group believes this will now speed up as it increases its leverage to expand its asset base and increase disbursements.

In an interview with FinanceAsia, President Director Sukatmo Padmosukarso and Chief Financial Officer Ari Soerono said the group was hopeful of boosting its asset base by about 70% to $550 million at the end of 2015 up from Rp4.75 trillion ($325 million) a year earlier.

The 2014 figure, in turn, represented a 23% increase from the Rp3.9 trillion IIF was able to achieve at the end of 2013. 

"It's been a challenging environment because of the presidential elections. But we should be able to grow our asset base by $250 million this year. Once we start to increase our leverage we can really accelerate our growth," said Soerono.

He said the group is likely to raise in the range of $150 million to $200 million from its inaugural bond offering, which will be rated. One interesting aspect will be whether it can pierce the sovereign's split BB+/Baa3 rating.

While it is 30% owned by government entity PT Sarana Multi Infrastruktur, the majority of its shareholders are much higher rated supranational entities including the Asian Development Bank (ADB) on 19.99% and International Finance Corp (IFC) on 19.99%. The German government's Deutsche Investitions-und Entwicklungsgesellschaft owns a further 15.15% and Sumitomo Mitsui Banking Corp the remaining 14.9%.

IIF has already made one foray into the commercial banking sector after borrowing $250 million in 2014 from a two-tranche senior unsecured loan. This comprised a $52.5 million A tranche supported by the IFC and $197.5 million B tranche led by lead arrangers Deutsche Bank and Standard Chartered. 

Soerono said the group currently has a debt to equity ratio of two times but could raise it up to six. 

IIF has a policy of matching its assets and liabilities so will only raise US dollar funding for projects with matching cash flows. Both Padmosukarso and Soerono acknowleged the challenges they face from the shallowness of Indonesia's domestic bond market, which is the least developed of any of Asean's founding five nations. 

Padmosukarso said one solution might be project bonds, which IIF is keen to help develop as part of its role acting as a catalyst for speedier infrastructure development. "Assessing the financial viability is part of the genetic make-up of our shareholder base. We want to maximise this wherever we can," he commented. 

"One idea is that we could be there standby buyer for infrastructure bonds and act as a market marker," he added.

Any guarantees for infrastructure bonds (guarantee cash flows) would not come from IIF even though this was part of its original mandate. "Our main focus is building up the asset side."

Padmosukarso suggested the most likely suitor would be Indonesia Infrastructure Guarantee Fund (IIGF), which was set up by the Indonesian government under the auspices of the ADB.

IIF had initially hoped to take a leading role in public private partnerships (PPP) but they have also proved slow to get off the ground in Indonesia because of delays getting them off the government's drawing board. Instead, IIF has been using its balance sheet to provide loans and mezzanine equity for projects.

Its first major project was a Rp500 billion commitment to a term loan to finance the Cikopo-Palimanan Toll Road, which is part of the trans-Java toll road. The borrower was Malaysia's PLUS Expressways.

More recently, in July it provided Rp400 billion in loans to PT Angkasa Pura (II), which is providing airport facilities at the expanded Soekarno-Hatta International Airport. 

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