Category: Finance

Indonesia-based reinsurer Marein to raise US$41 rights issue in 2017

Maskapai Reinsurance Indonesia (Marein), one of only four local reinsurance companies in the country, has made plans to raise US$41 million from a rights offering in 2017.

The company said it will sell up to 130 million new shares in a right issue by June 2017 in order to strengthen its existing capital.

Reinsurers provide insurance for other insurance companies, Marein along with Reasuransi Indonesia Utama, Reasuransi Nasional Indonesia, and Tugu Reasuransi Indonesia are the only four local reinsurance companies in Indonesia.

Local firms often lack capital compared to their larger foreign reinsurance peers, forcing Indonesian insurance firms to seek coverage for big insurance policies abroad.

However, when local insurance firms pay for premium overseas coverage, it will complicate government efforts to balance the country’s current account.

Hence, Financial Services Authority (OJK) has requested the four reinsurers, Marein and its rivals to increase their capacity to cover more clients.

“In order to increase the capacity, we have to raise capital,” said Marein president director Robby Loho to Jakarta Globe.

“The company is expected to reap IDR 1.5 trillion in premium income this year, with an increment of 40 percent from last year’s IND 1.07 trillion”, said Yanto J. Wibisono, Marein’s finance director.

Besides, the premium income at Marein has also reached IDR 907 billion in the first nine months this year, increasing by 29 percent from the same period in 2015. This was driven by a double-digit growth in life and general reinsurance segments this year.
Fitch Ratings, one of the big three credit rating agencies affirmed Marein’s national insurer financial strength with an A+, as well as its international IFS rating of BB back in August.

Fitch said that the rating reflects Marein’s high business concentration in catastrophe-prone Indonesia, its modest market position, and despite its long operating record, small asset size compared with some of its local and regional peers.

By Vivian Foo, Unicorn Media.

Japan’s Outsourcing Inc acquires German Orizon Holding for US$85.2 million

Japanese Business Process Outsourcing (BPO) firm Outsourcing Inc. has announced the acquisition of German staffing company Orizon Holding for an estimated €81.6 million (about US$ 85.2 million).

Outsourcing has acquired the full stake of the business through the Japanese group’s German subsidiary OSI Holding in a move to safeguard its business operations amid a highly unpredictable and volatile market.

The closing of the transaction is expected to occur by June 30, 2017. This deal will also see an exit for private equity firm Silverfleet Capital Partners after almost ten years in portfolio.

The acquisition of Orizon Holding is part of Outsourcing’s latest plan – VISION 2020: Tackling New Frontiers, in which the Tokyo-headquartered firm aims to grow in the direction of Lehman-class environmental change.

However, the BPO firm also noted that it has been conventionally engaged in manufacturing outsourcing business and confronted volatility risks since the collapse of Lehman Bros in 2008.

Thus, with this acquisition, Outsourcing Inc. can leverage on the strategic location of Germany, one of Europe’s leading industrialized countries for the overseas expansion of their manufacturing businesses.

Besides, Orizon Holding is also the eight largest staffing company in Germany with its strengths in mechanical engineering, aviation, and medical sectors.

“Orizon surpasses its peers in profitability and is expected to achieve ongoing growth,” Outsourcing Holdings said in a statement.”This transaction will provide the group with a strong foothold to develop into the European industrial nations, including those in Eastern Europe.”

The company has kickstarted some medium-term management initiatives to scale globally into the sectors with less susceptibility of fluctuations.

The plans call for outsourcing business to convenience stores industry and the U.S. military bases in Japan, while undertaking the public services contracted to the private sectors in Australia and the UK.

In August 2016, Outsourcing Inc. has earlier strengthen its Europe footprint by acquiring British BPO business Liberata for 43 million pounds (about US$ 53.4 million).

By Vivian Foo, Unicorn Media

Warburg Pincus-backed D&J China launches US$1.45 billion industrial park fund with AVIC Trust

D&J Industrial Property China Investment Ltd., a business park and suburban office developer which is owned by Warburg Pincus through a majority stake, has launched a capital fund with AVIC Trust to invest in industrial infrastructures in China.

Co-founded by the Aviation Industry Corporation of China (AVIC) and OCBC Bank of Singapore, AVIC Trust is an investment and trust manager in China, with assets under management of over RMB430 billion (about US$62.18 billion).

With this partnership, the D&J Zhiyan Equity Investment Fund raises an initial equity capitalization of RMB10 billion (about US$1.45 billion), founded on a USD-RMB hybrid basis, which is said to be the first of its kind in China.

“In addition to helping tenants lower potential cost of land sourcing, infrastructure and facilities construction, the fund also seeks to provide integrated services in the areas of finance, data storage, consultancy, and R&D,” said the chairman of AVIC Trust, Yao Jiangtao.

The capital is dedicated to China’s industrial infrastructure landscape, where it will mainly be used to invest in modern integrated industrial parks in China’s major cities – backing projects which include business parks, production facilities, and R&D parks.

“Driven by a strong trend for an industrial upgrade, continued urbanization and rise of the knowledge economy, the fund will invest in quality assets and provide modern infrastructure services for corporates and manufacturers across the entire industry value chain,” said Sun Dongping, the co-founder and chairman of D&J China.

China’s D&J Industrial holding is the second real estate platform co-founded by Warburg Pincus and Sun Dongping, after the pair co-founded warehouse developer e-Shang in 2011.

Since its establishment, China D&J has completed two rounds of financing and currently has over 1.2 million square meters of operating and under development properties in Beijing, Shanghai, and other Chinese cities.

The company’s tenants portfolio include Shell, Abbott, and FMC, as well as high-tech knowledge economy companies – Asiainfo and iSoftStone.

D&J China targets to grow its assets to over 5 million square meters in the next three to five years, targeting to increase its total asset value to RMB45 billion by 2020.

By Vivian Foo, Unicorn Media

Temasek Holdings to take stake in Oxford Sciences Innovation

Singapore’s state investment fund – Temasek Holdings has become a limited partner in Oxford Sciences Innovation (OSI), which develops and commercialises intellectual properties from Oxford university.

Participating through the means of capital infusion, this is Temasek Holdings’ first investment in the UK-based university fund. The financial terms of the investment were undisclosed.

This is part of a larger £230 million (about US$ 289.9 million) financing round that was announced on December 9, which has boost OSI’s capital base to almost £600 million.

The investment round had both new and existing investors, including some of Asia’s leading technology corporations and sovereign wealth funds such as Singapore’s Temasek and Oman Investment Fund, which are among the new wave of investors.

“We are very excited to be working with new shareholders from across the world, notably from Asia and continental Europe, and also grateful to our original supporters, the 10 largest of which have participated in this funding round,” said the chairman of OSI, Peter Davies.

With the new funding round, OSI’s capital base which previously stood at £350m has now expanded to £580 million (about US$ 731 million), making it the largest private university fund in the United Kingdom.

“Raising this capital reflects our confidence in the breadth and quality of opportunity available to investors to help the University of Oxford develop a world-class commercial ecosystem around its unmatched intellectual capital and heritage,” Davies add.

Founded in 2015, the formation of Oxford Science Innovation (OSI) aims to maintain the university’s position as one of the world’s leading research institution, providing capital and scaling expertise to businesses that are driven by its in-house intellectual property.

To date, the fund has backed approximately 20 spin-out startups based on the technology from university’s labs. Among its track record of developed businesses include Oxford Nanoimaging, Vaccitech and Oxford Flow.

Temasek is reshaping its holdings and bracing for lower returns after in July reporting the first decline in its portfolio in seven years. The value of assets fell 9% to US$ 242 billion in the fiscal year ended March 31, according to the firm’s annual review.

Temasek Holdings Pte, Singapore’s state-owned investment fund, said it will focus on being an active investor as it increases holdings in overseas companies.

By Vivian Foo, Unicorn Media

Indonesian coal producer Bumi Resources to restructure debt, paring down US$ 2 billion via Preemptive Rights offering

Indonesian coal producer PT Bumi Resources Tbk (BUMI) is looking to restructure its finance. The company plans to swap its debts for share, through raising IDR 26.9 trillion (about US$ 2 billion) through a rights offering.

The company will issue up to 29.1 billion new shares which are equivalent to 79.5 percent of its enlarged capital with Preemptive Rights (ER). These 29.1 billion shares will then be sold at about IDR 926 per share.

The transaction is expected to take place in 2017, fetching a total amount of IDR 26.9 trillion – part of the company’s efforts to restructure its US$ 4.2 billion debt.

The debt is intended to be reduced to US$ 1.6 billion, of which US$ 2 billion will be converted into shares, while the remaining will become Mandatory Convertible Bonds (MCB) or mandatory convertible bonds with a seven-years term.

Bumi Resources will use the proceeds to pay off debts to China Investment Corporation (CIC) along with eight other lenders. In an event that shareholders are reluctant to participate, the creditors will absorb all new shares issued, allowing Bumi Resources’ obligations to be converted into shares.

Later, no interests will be converted into shares of the company.

“This way, the old shareholders are given the opportunity to keep their ownership, but at a higher sum than the company’s current stock price. This is already stated in the agreement between the firm and creditors,” said finance director at Bumi Resources, Andrew Beckham, in Jakarta recently.

In the proposal, CIC would control 22.6 percent of Bumi Resources’ shares while 2016 bondholders would get 4.6 percent, and 2017 bondholders would obtain 10.6 percent. Credit Suisse would also get 3.6 percent, UBS 0.8 percent, Axis Bank 0.8 percent, Deutsche Bank 0.7 percent, and Raiffeisen Bank International 1.2 percent.

Bumi Resources primarily exports coal to China, Japan, and India. The Bakrie family-controlled firm supplies 25 percent of its coal to the domestic market and aims to boost coal production up to 100 million tonnes next year following this agreement for a debt-restructuring scheme.

The company forecast its production to increase by 5 percent more with the sales target also increasing by 7 percent in the near future, considering the surging demand for coal in the country as a result of the government’s ambitious electricity procurement programme.

Known as the most indebted coal miner in Southeast Asia, Bumi Resources has spent half the decade trying to reduce its debt.

In August, the company sold 50 percent of its stakes in unit Leap Forward Resources Ltd to two investors – Smart Alliance Ltd and Oceanpro Investments – in a US$ 90 million deal. The transaction was used to repay part of the company’s debts to Axis Bank Ltd, according to corporate secretary Dileep Srivastava.

On Friday, Bumi Resources shares increased by 0.68 percent to close at IDR 296 per share, against a 0.08 percent gain in the broader index.

By Vivian Foo, Unicorn Media

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