Indonesia's Danantara plans dollar bond sale worth at least $500 mln, sources say

The investment arm of Indonesia's sovereign wealth fund Danantara is looking into issuing at least $500 million of long-dated tenor U.S. dollar-denominated bonds, two sources with direct knowledge of the matter told Reuters. One of ‌the sources ⁠said Danantara ⁠Investment Management, the investment vehicle, would likely choose either 20- or 30-year tenors for the bonds, not both.

The sale would extend Danantara's offshore funding curve into longer maturities as it rapidly expands into a key vehicle for President Prabowo Subianto's ambitious economic agenda, but investors continue to weigh risks related to its governance, independence and ability to execute. The planned sale would also test the willingness of global investors to lend to Danantara at much longer maturities after its $1.5 billion debut dollar bond in ⁠June attracted ‌strong demand. The economic backdrop is fragile.

While the rupiah remains close to a record low, the central bank kept rates unchanged on Wednesday after 100 basis points of ⁠hikes since May to support the currency. Jakarta stocks are also among Asia's worst performers this year despite a recent rebound. "The strategic rationale for the bonds plan is to better match its long-term overseas equity investments with long-term USD funding, reducing currency mismatch risk," one of the sources said, adding it will also reduce incremental demand pressure on the rupiah.


The timing of the issuance will be flexible as Danantara is not under "any liquidity pressure", the source said on Thursday. Danantara did not immediately respond to a request for comment. The fund ‌has hired Citigroup, HSBC, JPMorgan, MUFG and Standard Chartered Bank as joint lead managers and bookrunners fo r the planned deal, according to a mandate announcement seen by Reuters on Tuesday.

The notes, if issued, ⁠will be drawn from Danantara's $5 billion global medium-term note programme. Investor materials seen by Reuters showed Danantara had 123 trillion rupiah in cash and cash equivalent as of April 30, supported by funding sources including its $1.5 billion debut dollar bond, a $10 billion multicurrency revolving credit facility, 70 trillion rupiah from state-owned enterprise dividends and 68.4 trillion rupiah from Patriot Bond issuances.

The materials also showed Danantara plans to align its portfolio in stages toward a 2030 strategic asset allocation, with 10%-20% in strategic investments, 20%-45% in private assets, 20%-40% in public assets, 15%-25% in a flexible allocation pool and 5% in liquidity reserves.