BNI gets top price for its $145 million Yankee bond issue

JAKARTA (JP): State-owned PT Bank Negara Indonesia 1946 has got a good price for its US$145 million Yankee bond issue after Indonesia's first sovereign issue last year.

BNI treasury director I Gusti Ngurah Antika said last night the coupon rate for its BBB-rated 10-year deal was set at 6.625 percent a year -- 110 basis points above the U.S. Treasury rate. BNI is the first Indonesian company to achieve this.

"The pricing of our bonds has been very much influenced by the government's Yankee bond issue last year," Antika said during a breaking of the fast gathering at his office.

Bank Indonesia, the central bank, acting on the government's behalf, launched the $400-million Yankee bond issue on July 25. The bonds were trading 100 basis points above Treasuries, equivalent to 7.75 percent a year.

Antika said BNI bonds got a lower coupon rate than Bank Indonesia's bonds because of Treasuries' declining coupon rate. "We were just lucky."

The government had said its Yankee bond issue aimed to create a benchmark for Indonesian corporations wanting to access investors looking for high-yield bonds in the U.S. market.

Before this, Indonesian corporations entering the U.S. market suffered from wildly fluctuating spreads. Many paid rates as high as 600 or 700 basis points above U.S. Treasuries.

One example is Riau Andalan Pulp and Paper's BBB-rated 10-year deal, which got 750 basis points above Treasury's in December 1995. But since Indonesia's sovereign issue Riau Andalan's bond spreads tightened to 440 basis points.

Another beneficiary from the new benchmark is Sampoerna International Finance Co., a financier for clove cigarette manufacturer PT HM Sampoerna.

Last year the company issued $200 million worth of 10-year guaranteed notes at 145 basis points above U.S. Treasuries and with a Baa3/BBB investment rating.

BNI president Widigdo Sukarman said his bond issue had received an "enthusiastic response" from investors. He did not elaborate.

BNI's bond issue, underwritten by J.P Morgan Securities, Salomon Brothers, PT BNI Sekuritas and Merrill Lynch, was done through BNI's New York branch on Jan. 29. It was not listed on the New York Stock Exchange.

Widigdo said proceeds from the bonds would be used for general funding, especially to finance exports and imports.

The amount of funds raised in the bond issue would still be within the ceiling limit the offshore loans monitoring team set.

The team sets the ceiling limit for foreign borrowing by state owned companies. For 1996/1997 fiscal year it set the limit at US$1 billion for the seven-state banks, of which BNI gets $145 million.

In previous years BNI issued floating rate notes to raise offshore funds. But such notes had short maturity terms of between five and seven years.

"Now, we are entering the Yankee bond market, merely to diversify our funding sources," Widigdo said.

BNI is the largest bank in the country in terms of assets and the first state-owned bank to list on local stock exchanges. The bank's total assets were Rp 32.35 trillion (US$13.5 billion) last June. (rid)