Government's Yankee bonds oversubscribed<\/p>\n
JAKARTA (JP): Bank Indonesia floated Yankee bonds on Thursday
\nworth US$400 million on the New York Stock Exchange, the
\ngovernment's first obligation issued in the United States.<\/p>\n
Bank Indonesia Governor J. Soedradjad Djiwandono said that the
\ndemand for the 10-year bonds -- which received BBB from Standard
\nand Poor's and BAA3 from Moody's -- was very encouraging.<\/p>\n
\"The bond offering was oversubscribed by more than 200
\npercent,\" the central bank governor was quoted by an Antara
\ncorrespondent as saying in New York.<\/p>\n
He said that the coupon rate of the bonds, whose total value
\nwas increased to $400 million from their initial size of $300
\nmillion, was set at 7.75 percent or 100 basis points over the
\nU.S. treasuries.<\/p>\n
The lead underwriter of the bonds was Solomon Brothers, with
\nGoldman Sach, JP Morgan and Merrill Lynch acting as co-managers.<\/p>\n
Soedradjad said that the underwriting fee of the bonds, the
\nfirst obligation issued by the government since 1988, was set at
\n0.65 percent, while the price was fixed at 99.48 percent of the
\npar value.<\/p>\n
The central bank governor said the level of the coupon rate of
\nthe government bonds was reasonable enough, much better than the
\nhigher-rated bonds issued by the Chinese government.<\/p>\n
He said the coupon rate of the bonds issued by the Chinese
\ngovernment earlier this month was set at 110 basis points over
\nthe U.S. treasuries.<\/p>\n
\"The low rate reflects investors' strong confidence on the
\nfundamentals of the Indonesian economy,\" Soedradjad said, adding
\nthat the low pricing also satisfied the central bank's
\nexpectation to establish the bonds as the benchmark for
\nIndonesian bonds overseas, especially those floated by private
\ncompanies.<\/p>\n
He acknowledged that the Indonesian government initially
\nplanned to issue $300 million bonds, but later raised the value
\nto $400 million.<\/p>\n
\"The value should be increased so that the bonds would be
\nliquid enough on the secondary market. If the bonds are liquid,
\nthey will function well as a benchmark,\" he said.<\/p>\n
He said that in addition to setting a benchmark, the issuance
\nof the bonds was also designed to diversify the government's
\nfinancial sources.<\/p>\n
Proceeds of the bonds, which are due in 2006, will be used for
\ngeneral funding purposes related to Indonesia's development
\nplans.<\/p>\n
Bond offerings made by Indonesian private companies overseas
\nwere generally more expensive than those floated by other
\ncountries due to the absence of the government bonds.<\/p>\n
By floating the government bonds, Indonesian bond issuers will
\nhave a benchmark or a guideline in setting up terms and
\nconditions of their bonds.<\/p>\n
Bank Indonesia issued a number of bond instruments overseas in
\nthe past, including those floated in Germany, Japan, the
\nNetherlands and Kuwait. The latest issue, worth DM300 million,
\nwas floated in Germany in 1988. It matured in 1994. (hen)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/governments-yankee-bonds-oversubscribed-1447893297",
"image": ""
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