Bargains Are Hidden in Indonesia’s $44 Billion of Distressed Debt

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Indonesia’s pile of pandemic-related corporate debt is offering some investors the chance to cherry-pick cheap assets before a government forbearance program runs out next year, Bloomberg News reported. The two-year-old government plan gives creditors and debtors time to resolve billions of dollars worth of loans to companies including airline PT Garuda Indonesia to prevent wholesale bankruptcies from the Covid-induced slump. Banks are keen to reduce their exposure to the distressed loans — worth about $44 billion in total at the last count in February — before the program ends in March 2023, prompting debt specialists such as Värde Partners and Helios Capital to mine the data for bargains. While Indonesia’s recovery has been slowed by the global economic shocks from the war in Ukraine, rising inflation and higher energy prices, its economy is doing better than many other emerging markets, helping to draw investors who have been burned by China’s property crisis or put off by the risks in nations that have more exposure to Russian sanctions. Once the forbearance program ends, banks may have to write off much of the remaining debt that couldn’t be sold or restructured. Read more.
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