Coronavirus thwarts PE partial exit from Indonesia's BFI Finance

Mediobanca, the parent company of Compass, said in a filing that the financial terms of the deal had become “unrealistic” in the light of COVID-19 and both sides had agreed on a termination. Once the macroeconomic stabilizes, Compass will review investment opportunities that facilitate expansion in attractive growth markets.

Having traded at IDR545 at the beginning of February, BFI’s shares sank to IDR240 at the start of April but since then they have rallied to IDR328. However, a 19.9% stake in the business was valued at IDR559 billion ($36.8 million) in August 2018 when the Compass deal was agreed. Now it is worth IDR291 billion. Mediobanca has also suffered due to the capital markets sell-off. Its stock has slumped by more than 45%, wiping out EUR4 billion ($4.4 billion) in value.

A consortium led by TPG and Northstar paid IDR1.44 trillion (then $168 million) for a 45.7% interest in BFI in May 2011. At current exchange rates, the deal would be worth $96.6 million. Completion of the partial exit to Compass was impeded by issues including a pre-existing legal case involving previous BFI shareholders. These were resolved at the end of 2019, putting the process on course for regulatory authorization in Indonesia and Europe.

BFI was established in 1982 as a joint venture between US-based Manufacturers Hanover Leasing Corporation and several local partners. It has three business areas: supporting companies that need working capital and financing for M&A and general business development; providing sales and leaseback financing for vehicle and equipment purchases; and multipurpose financing for companies without collateral.

As of March, BFI had 247 outlets nationwide. It planned to close approximately 20 outlets in response to COVID-19. In mid-April, the Indonesian government instructed lenders to relax conditions on loans to customers impacted by the pandemic. BFI said this had led to a spike in loan restructuring requests – restructuring schemes, grace periods on interest payments, and payment extensions – representing more than 10% of the total portfolio.

The company had IDR19.7 trillion in total assets at the end of the first quarter, IDR18.6 trillion in managed receivables, and IDR12.4 trillion in debt. Revenue came to IDR5.2 trillion in 2019, up from IDR5 trillion the previous year. However, a substantial rise in costs saw net profit decline from IDR1.46 trillion to IDR712 billion.

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• Topics
• Southeast Asia
• Trade sale
• Financials
• Indonesia
• Northstar Group
• TPG Capital
• Financial Services
• covid-19
• coronavirus