Jakarta. The government has raised $4.3 billion from selling dollar-denominated "pandemic bonds" in three trances on Tuesday, including the first 50-year dollar-denominated bonds ever issued by an Asian nation, to help finance a fiscal stimulus to counter the impact of the coronavirus pandemic on the Indonesian economy and financial system.
"This is the largest issuance of dollar-denominated bonds by the Indonesian government in history," Finance Minister Sri Mulyani Idrawati said in a press conference on Tuesday.
"We are the first country in Asia to issue a sovereign bond since the Covid-19 pandemic [accelerated] in February. No countries in Asia has entered the global bond market due to high volatility and huge turmoil," Sri Mulyani said.
The bond issuance attracted a lot of interest from investors at the Singapore Stock Exchange and Frankfurt Stock Exchange, being two times oversubscribed in both places with a total bid of more than $10.9 billion.
Citigroup Global Market, Deutsche Bank, Goldman Sachs, Hong Kong and Shanghai Banking Corporation (HSBC) and Standard Chartered acted as joint book-runners for the deal, with local brokers Danareksa Sekuritas and Trimegah Sekuritas as co-managers.
Sri Mulyani said Indonesia raised $1.65 billion from selling bonds due on Oct. 15, 2020, with a yield of 3.9 percent.
The government also raised $1.65 billion from 30-year bonds due on Oct. 15, 2050, with a yield of 4.25 percent.
Lastly, the government raised $1 billion from 50-year bonds maturing on April 15, 2070, with a yield of 4.5 percent.
"The 50-year tenor shows investors' confidence in economic conditions in Indonesia and our management of state finances," Sri Mulyani said.
"The appetite for long-term tenor bonds was quite strong, so the yield was also good. In fact, the yield we got was better than similar transactions in 2015 and 2018," Sri Mulyani said, mentioning Indonesia's previous dollar-denominated issuances.
The 50-year bond bears a 4.5 percent yield, lower than the 4.78 percent yield of the country's 10-year bond issued in 2018.
Sri Mulyani said the government will use the proceeds from the bond issuance to finance its Rp 150 trillion ($9.3 billion) recovery programs and loan restructuring schemes, part of the Covid-19 stimulus package.
"This will become a resource we've set aside to anticipate a domino effect [from the Covid-19 pandemic] that could threaten the economy and the stability of our financial system," she said.
The minister said the government has yet to determine how exactly it would use the funds. Some alternatives include using them for capital injection to state-owned banks or financial services, for government direct investment or for government guarantees for companies carrying out projects for the government.
Global rating agency Moody's Investor Service on its rating notes for the pandemic bonds on Tuesday said Indonesia's previous exposure to external debts could have a spillover effect on its banks.
"Weaker corporate credit profiles due to higher debt servicing and roll-over costs hurt bank asset quality," Moody's said.
Still, Moody's assigned a Baa2 rating for the bonds, mirroring the country's investment-grade rating with a stable outlook, highlighting Indonesia's policy emphasis on macroeconomic stability that increases its resilience to shocks.
"The sovereign's credit profile is supported by narrow fiscal deficits and low government debt ratios," Moody's said in the statement.
Standard and Poor's Financial Services and Fitch Ratings assigned BBB rating, also two notches above investment-grade, for the pandemic bonds.