BNI cancels dollar debt issue

BNI cancels dollar debt issue

State-controlled Bank Negara Indonesia (BNI), the country's
second-largest bank in terms of assets, said it would postpone a
planned dollar-denominated bond issue amid rising economic
uncertainty as a result of the falling rupiah.

BNI president Sigit Pramono said the bank's plan to issue
around US$300 million in sub-debt bonds would be delayed until
the third quarter of this year on fears that investors would
demand overly high yields, thus raising the borrowing cost.

"We may not get the maximum benefit if we issue the bonds
based as scheduled in June. The market is just not favorable. We
fear that we will have to pay higher rates and costs for the
issue," said Sigit after a meeting with legislators on Thursday.

The BNI, which has appointed Barclays Capital and JP Morgan
for the issue, previously said the issue was aimed at raising
cash to help strengthen its capital condition and finance credit
expansion.

The bank has decided to expand new lending to Rp 16 trillion
this year, or 86 percent higher than in 2003. As of last year,
the bank had channeled a total of Rp 46.4 trillion in loans.

To support the expansion, the BNI needed to set its capital
adequacy ratio (CAR) higher. At present, its CAR stands at 18.17
percent, higher than the minimum requirement of 8 percent set by
the central bank.

BNI shares ended higher by Rp 50 to Rp 1,150 on the Jakarta
Stock Exchange on Thursday.

The BNI's decision to cancel its bond issue follows the
government's recent move to delay bond sales after investors
demanded high yields amid the falling rupiah, inflationary
pressure and a possible hike in interest rates.

The Ministry of Finance was scheduled to issue Rp 3.5 trillion
(US$388.46 million) worth of bonds on Tuesday, however, it only
received bids totaling Rp 3.1 trillion. Investors demanded an
average yield of 11.74 percent, higher than the 10.72 percent
yield at last month's bond auction. -- JP