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Experts doubt govt’s plan to restrict bond issuance by ailing SOEs
Experts say restricting bond issuance to prevent defaults among SOEs may not work as the government overlooks more pressing matters related to its own development policy.
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Erick Thohir, head of the Asian Games 2018 Organizing Committee (INASGOC), speaks to journalists during a press conference in Jakarta on July 12, 2018. (AFP/Adek Berry)
T
he government plans to restrict financially unsound state-owned enterprises (SOEs) from issuing bonds in the hope of preventing them from defaulting on payments.
The plan was outlined by SOE Minister Erick Thohir during a meeting with the House of Representatives earlier this month. The ministry has been in communication with the Financial Services Authority (OJK) and the Indonesia Stock Exchange (IDX) to unify their views regarding the planned deliberation.
Ministry spokesperson Arya Sinulingga said on Thursday the decision followed the failure of a number of state-owned construction firms to make timely coupon payments on their corporate bonds. The ministry, he said, would be more selective in allowing SOEs to seek debt financing from bonds.
“Of course, the financial condition [of the SOE] must be good. No more fraud. [Only] those which are healthy [financially] can issue bonds,” he said, as quoted by Bisnis.com.
In May, state-owned construction firm Waskita Karya failed to convince its creditors to postpone payments on its Rp 135.5 billion (US$9.23 million) debt, which resulted in its defaulting and the IDX halting trading on its stocks.
Later that same month, another construction SOE, Wijaya Karya (WIKA), made a request to its creditors to delay its bond payments, which was approved so the company escaped a similar fate to Waskita.
Local ratings agency Pefindo has lowered both Waskita and WIKA’s debt ratings, highlighting that it was plausible the former’s ratings could be downgraded further into default, as reported by Bisnis.com.
