Bank Mandiri bonds receives strong market demand

Bank Mandiri bonds receives strong market demand

Dow Jones, Jakarta

The giant state-owned Bank Mandiri sold US$300 million in senior bonds on Friday, more than the planned $200 million due to strong demand from the market, a banker familiar with the deal said.

The solid interest in the bonds also allowed the bank to offer a lower yield-to-maturity of 7.125 percent from earlier indications of a 7.25 percent to 7.50 percent range.

He said Bank Mandiri assigned a fixed 7 percent annual coupon to the five-year bonds.

The offering, the first dollar-denominated bond out of Indonesia this year, attracted overwhelmingly interest due to a dearth of new issues from Indonesian companies and a healthy market appetite for high yielding notes.

The banker told Dow Jones Newswires that the issue attracted nearly $1 billion in bids, allowing the state-owned bank to increase the offering and reduce the yield.

The yield was 425 basis points over five-year U.S. Treasurys.

"Several market observers were skeptical that we should be launching a bond at this time in light of hostilities in Iraq and SARS (severe acute respiratory syndrome) problems. The result speaks for itself and I am extremely pleased about the pricing outcome," Bank Mandiri's chief executive officer Edwin Neloe said in a written statement.

The notes are the first under Bank Mandiri's $1-billion debt issuance program. Proceeds from the current offering and any later issues under the program will be used to refinance existing borrowings and finance business expansion.

The encouraging response to Bank Mandiri's offering is expected to open the door for more issuance from the country, especially by government-owned banks and corporations.

Oil and gas company PT Medco Energi International is planning to issue between $100 million and $150 million in bonds.

Like Bank Mandiri, Medco named Credit Suisse First Boston and UBS Warburg as joint lead bookrunners and managers for the issue.

Part of the appeal of Bank Mandiri's paper was the bank's quasi-sovereign status, especially for investors seeking to increase their exposure to Indonesian credits but are somewhat constrained by the lack of liquidity in the country' sovereign bond, observers said.

Fitch Ratings, in assigning a long-term rating of B to the Bank Mandiri senior notes due 2008, said this was in line with the sovereign's rating.

The agency said the bank's rating "reflects its overall adequate financial standing and likelihood of government support in the event of need."

Moody's Investors Service has assigned a B3 rating to the notes, while Standard & Poor's has rated the notes B-minus.