TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

Corporations look to alternative financing after latest BI rate hike

News Desk (The Jakarta Post)
Jakarta
Tue, June 5, 2018

Share This Article

Change Size

Corporations look to alternative financing after latest BI rate hike Brokers monitor the trading of bonds and other debt papers at a dealing room of Bank Rakyat Indonesia in Jakarta in this undated photograph. (kompas.com/Hendra A Setyawan )

A

fter Bank Indonesia (BI) increased its seven-day reverse repo rate (7DRRR) for the second time in two weeks, companies are looking for alternative ways to finance the expansion of their businesses.

BI hiked its key rate by 25 basis points to 4.75 percent last Wednesday.

“The increase of the BI 7DRRR will initially affect the interbank financial market, then reverse rates and finally lending rates,” said securities firm Semesta Indovest Sekuritas analyst Aditya Perdana Putra, as reported by kontan.co.id on Monday.

Therefore, corporations had to find alternative, cheaper financing options, such as through real estate investment trusts (REITS), right issues and the issuance of bonds.

 “The coupon rate is in the range of 11 to 12 percent for corporate bonds. That is still lower than bank lending rates, which are in the range of 16 to 20 percent,” Aditya added.

Coal mining firm PT Bukit Asam PTBA, for example, said the company would consider issuing bonds for the development of coal-fired power plants (PLTU).

Currently, the company was still relying on internal funds to support its expansion. “We have no plans to issue bonds in the near future,” said PTBA corporate secretary Suherman.

Meanwhile, state-owned construction company PT PP corporate secretary Agus Samuel Kana said the issuance of bonds had become an alternative financing option.

He said PT PP had already issued Rp 1.5 trillion (US$108 million) of bonds this year.

Aditya, however, said corporations also needed to look into their respective debt-equity ratios that may increase in line with the increase of the BI reference rate. (bbn)

{

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank You

Thank you for sharing your thoughts. We appreciate your feedback.