Indonesia: Perpetuals to boost long-term infrastructure investment, says minister

• Apr 18, 2018

The National Development Planning Minister has said that the newly launched perpetual bonds (SBP) program will boost private sector participation in infrastructure projects across the country.

The bond issuance aims to attract long-term investment fund managers at insurance companies, pension funds and the like, National Development Planning Minister Bambang Brodjonegoro, who is also head of the National Development Planning Agency (Bappenas), said on Wednesday in Jakarta as quoted by kompas.com.

Perpetual bonds are a financial instrument without a maturity date that resemble equity, with the issuer paying investors coupons for an indefinite term.

“The SBP is expected to attract more long-term fund managers to invest in infrastructure projects,” said Bambang.

State-owned construction company PT PP will be the first company to issue perpetual bonds, with the issuance set for May 14 with an annual net yield of 8.25 percent that is payable every three months.

Bambang said the SBP issuance was part of the government’s efforts to develop more infrastructure projects without burdening the state budget, which could be done one of two ways: through bank loans or direct equity investments.

For bank loans, investors would carefully consider the debt-to-equity ratio before deciding to disburse long-term loans, Bambang said.

The SBP was a form of direct investment, the minister said, adding that investors were usually cautious before deciding to invest directly, because they had to wait a long time to gain returns. (bbn)

Source: http://www.thejakartapost.com/news/2018/04/18/perpetuals-to-boost-long-term-infrastructure-investment-says-minister.html