Indonesia's planned $1 billion bonds rated B+ by S&P<\/p>\n
Bloomberg, Jakarta<\/p>\n
Indonesia's proposed US$1 billion global bond was assigned a B+
\nforeign-currency rating by international ratings company Standard
\n& Poor's Corp., four levels below investment grade.<\/p>\n
The rating is supported by the country's declining debt and
\nthe government's handling of the budget, S&P analysts Agost
\nBenard and Ping Chew said in a statement from Singapore. The
\nrating applies to a total of $145.4 billion of overseas debt.<\/p>\n
Investors such as Stephen Chang said he may buy the bonds
\ndepending on the price. \"We don't have a problem with the
\ncredit,\" said Chang, who helps manage about $2 billion of Asian
\nbonds at JF Asset Management in Hong Kong. \"It will depend on the
\nvalue of the bonds.\"<\/p>\n
S&P in December lifted the nation's long-term foreign-
\ncurrency rating one step to B+. Moody's Investors Service assigns
\na ranking of B2, five rungs below investment grade.<\/p>\n
\"We can foresee within this year a further rating upgrade if
\nthe fundamentals, like growth, continue to improve,\" said Chang.<\/p>\n
Southeast Asia's largest economy is selling bonds to help plug
\na budget deficit estimated at Rp 28 trillion (US$3 billion) this
\nyear.<\/p>\n
The Indonesian government plans to meet investors for the sale
\nof its third dollar-denominated bond since 1996 starting in Hong
\nKong on March 17 and Singapore the following day, Mulia Nasution,
\ndirector general of treasury at the Finance Ministry, said on
\nMonday.<\/p>\n
Indonesia's 6.75 percent dollar-denominated bond maturing in
\nMarch 2014 was bid to yield 6.6 percent, according to Deutsche
\nBank prices at 4:10 p.m. in Jakarta.<\/p>\n
The extra yield, or spread, investors demand to hold the
\nsecurity instead of like-maturity U.S. Treasuries widened to 2.09
\npercentage points from 1.89 percentage points Monday, according
\nto data compiled Bloomberg. The securities were priced to yield
\n2.77 percentage points more than Treasuries when they were sold
\nin March.<\/p>\n
President Susilo Bambang Yudhoyono's government decided on
\nMarch 1 to reduce fuel subsidies in a bid to narrow the budget
\ndeficit, leading to an average 29 percent rise in the cost of
\nfuel. Lower subsidies will help to trim the deficit to 1 percent
\nof gross domestic product this year from 1.3 percent in 2004,
\naccording to the Finance Ministry in February.<\/p>\n
\"It is encouraging that the administration has made good on
\nits promise to cut fuel subsidies, and that it was able to
\naccomplish this at minimal political cost,\" Standard & Poor's
\nsaid. The government may be able to balance its budget in 2007,
\nthe statement said.<\/p>\n
The bonds were assigned a BB- ranking by Fitch Ratings, three
\nlevels below investment grade. The rating outlook is positive,
\nFitch said in a statement.<\/p>\n
Indonesia in January hired Citigroup Inc., Deutsche Bank and
\nUBS AG, the leading underwriters of Asian debt sales in 2004, to
\nhelp manage the bond sale. The government also appointed JPMorgan
\nChase & Co. and Credit Suisse First Boston to help in its third
\noverseas bond sale.<\/p>\n
The government sold $1 billion of 10-year bonds in March last
\nyear, its largest overseas debt sale and the first since the 1997
\nfinancial crisis, drawing demand for more than eight times the
\namount offered. JPMorgan and Deutsche Bank helped manage the
\nsale.<\/p>\n
Indonesia's rating is constrained by the slow pace of growth
\nand \"heavy\" external debt payments, S&P said in the report. \"The
\ntrend rate of economic expansion remains below potential,
\naveraging just 4.1 percent in the past five years,\" S&P said.<\/p>\n
Susilo, who came to power in October, wants growth to average
\n6.6 percent a year in the next five years as he creates more
\njobs, he said in Singapore Feb. 16. The economy expanded 5.1
\npercent last year, the strongest since 1996. It is forecast to
\nexpand 5.5 percent this year.<\/p>\n
The government's debt was equivalent to an estimated 78.5
\npercent of gross domestic product in 2004, declining from 96.6
\npercent in 2001, S&P said. The debt consists of $78.5 billion of
\noverseas borrowing and 621.2 trillion rupiah of local-currency
\ndebt, according to central bank data in January.<\/p>\n
In its 2005 budget, the government estimated overseas debt
\npayments, including interest, would be equivalent to $7.7
\nbillion, or about 3.2 percent of GDP.<\/p>",
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