Bloomberg

Bloomberg Jakarta

BRI may increase July bond sale to $120m

PT Bank Rakyat Indonesia (BRI), which the government plans to sell in the second half of this year, may boost a planned July dollar-bond sale by one fifth to US$120 million to bolster its capital and fund new lending.

BRI will name a foreign bank to manage the sale next week, Finance Director Wayan Alit Antara said. UBS Warburg, which is arranging BRI's initial share sale, Deutsche Bank AG, J.P. Morgan Chase & Co, HSBC Holdings Plc and Credit Suisse First Boston Inc. are competing for the mandate, he said.

The dollar bonds will mature in between seven and 10 years.

"The $100 million is the minimum amount we are looking at," Wayan said. "We are thinking of raising it to $120 million."

BRI joins rival Indonesian companies in seeking to capitalize on investor appetite for high-yield debt amid a decline in global interest rates. PT Bank Negara Indonesia, the country's largest publicly traded lender, will raise $50 million in 10-year dollar bonds in June to boost funds for lending.

PT Bank Mandiri, Indonesia's largest lender by assets, last month sold $300 million of five-year bonds, 50 percent more than earlier planned in the nation's largest sale of U.S. debt since the Asian financial crisis of 1997. UBS Warburg and Credit Suisse First Boston helped arrange the sale.

Proceeds from the sale will also help BRI improve its capital adequacy ratio -- a measure of its financial strength. The ratio stood at 12.62 percent at the end of 2002, more than the 8 percent minimum required by the central bank. Earlier this month, the bank said it was seeking to sell $100 million of bonds.

In September, BRI plans to sell another Rp 1 trillion ($120 million) of 10-year bonds, Wayan said. Local banks, including PT Andalan Artha Advisindo, PT Trimegah Securities and PT Bahana Securities have expressed interest in managing the sale, and an adviser will be selected by the end of May.

"We need more time to sell rupiah bonds and so we expect to sell it in September," Wayan said. President Director Rudjito earlier said the bank plans to sell the bonds in June.

UBS Warburg was hired by the Indonesian government to manage the initial share sale of BRI later this year. It may sell as much as 30 percent of the bank in an initial share sale, bankers involved said in April.

The bank received Rp 20.4 trillion of government bonds in July 2000, as part of a bailout of the country's financial system after the rupiah collapsed in 1997-98.

With 10-year U.S. Treasuries yielding about 3.32 percent, Indonesian debt is drawing investors looking for higher returns, encouraged by the rupiah's 7.6 percent appreciation this year.

Indonesian dollar bonds are up 5.58 percent this year, according to indexes compiled by HSBC Treasury & Capital Markets for eight Asian nations. Philippines debt is the best performing, up 9.46 percent.