BNI, Niaga may issue bonds next year

Bank Negara Indonesia (BNI) and Bank Niaga, respectively the country's third and seventh largest banks by assets, plan to issue subordinated bonds in the first half of 2005 to improve their capital adequacy ratio (CAR) and long-term funds.

BNI president Sigit Pramono said the bank planned to issue US$300 million subordinated bonds in the second quarter next year, after it completed its audited 2004 financial report and gained approval from the central bank.

"The bond issue plan is likely to be feasible in the second quarter next year after we obtain the approval needed ... from Bank Indonesia," said Sigit in a telephone interview on Thursday.

Sigit said the bonds would be allocated not only toward strengthening the bank's CAR, but also for improving its third- party fund structure, which are now mostly short-term funds, by expanding its long-term funds.

The bonds are to have a maturing period of 10 years.

BNI initially planned to issue the bonds this year, along with the government's plan to sell its 30 percent stake in the bank to public investors.

However, due to regulatory constraints and unfavorable market conditions, the BNI management decided to postpone the plan.

Elsewhere, an official with Bank Niaga who was quoted by Dow Jones Newswires said the bank sought to sell $100 million in subordinated bonds by the end of February, with a 10-year maturity period and a call after five years.

The official said the bank was in the process of appointing a lead manager for the bonds, which are expected to boost Niaga's CAR to as much as 14 percent. -- JP