Singapore’s bond market is bracing for the latest unfortunate export from Indonesia: debt defaults.
The city state, shrouded in smog from fires in its neighbour, is also starting to feel the impact of that nation’s currency woes. Indonesian phone retailer PT Trikomsel Oke’s Singapore-dollar bonds plunged to record lows last week after it blamed a weak rupiah when flagging a possible bond restructuring that would be the local market’s first in six years.
Singapore is feeling the side effects of a plunging rupiah, Asia’s second-worst performer this year, following two dollar bond defaults in Indonesia, as Southeast Asia grapples with a slump in commodity prices. The island, often viewed as a barometer for growth in Southeast Asia, narrowly skirted recession when its economy grew just 0.1% in the three months through September. Now, its capital markets are being tested.
“What makes Trikomsel’s situation unusual is that such defaults or debt restructurings have been extremely rare in Singapore’s corporate bond market,” said Xavier Jean, a Singapore-based director of Asia Pacific corporate ratings at S&P, which doesn’t rate the Indonesian company. “Whatever the outcome, funding costs in Singapore’s domestic bond market appear set to rise and investors will become more selective.”
Jakarta-based Trikomsel last week said it can’t service its debts indefinitely and wants to restructure $215 million of notes. That signals more pain for Singapore issuers amid poorer returns from debt-funded spending binges as costs rise with the U.S. dollar, S&P said last week. A Trikomsel default would mark Singapore’s first bond failure since Celestial Nutrifoods Ltd. and Sino-Environment Technology Group Ltd. skipped repayments in 2009.
Trikomsel and its adviser FTI Consulting will hold a call with bondholders on Oct 26 to explore restructuring options before the next semi-annual coupons come due in November and December. Trikomsel company director Juliana Samudro didn’t immediately respond to an e-mail and phone call seeking comment on Monday.
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The city state, shrouded in smog from fires in its neighbour, is also starting to feel the impact of that nation’s currency woes. Indonesian phone retailer PT Trikomsel Oke’s Singapore-dollar bonds plunged to record lows last week after it blamed a weak rupiah when flagging a possible bond restructuring that would be the local market’s first in six years.
Singapore is feeling the side effects of a plunging rupiah, Asia’s second-worst performer this year, following two dollar bond defaults in Indonesia, as Southeast Asia grapples with a slump in commodity prices. The island, often viewed as a barometer for growth in Southeast Asia, narrowly skirted recession when its economy grew just 0.1% in the three months through September. Now, its capital markets are being tested.
“What makes Trikomsel’s situation unusual is that such defaults or debt restructurings have been extremely rare in Singapore’s corporate bond market,” said Xavier Jean, a Singapore-based director of Asia Pacific corporate ratings at S&P, which doesn’t rate the Indonesian company. “Whatever the outcome, funding costs in Singapore’s domestic bond market appear set to rise and investors will become more selective.”
Jakarta-based Trikomsel last week said it can’t service its debts indefinitely and wants to restructure $215 million of notes. That signals more pain for Singapore issuers amid poorer returns from debt-funded spending binges as costs rise with the U.S. dollar, S&P said last week. A Trikomsel default would mark Singapore’s first bond failure since Celestial Nutrifoods Ltd. and Sino-Environment Technology Group Ltd. skipped repayments in 2009.
Trikomsel and its adviser FTI Consulting will hold a call with bondholders on Oct 26 to explore restructuring options before the next semi-annual coupons come due in November and December. Trikomsel company director Juliana Samudro didn’t immediately respond to an e-mail and phone call seeking comment on Monday.
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