BNI to issue up to Rp 1 trillion in bonds in June

Dadan Wijaksana, The Jakarta Post, Jakarta

Publicly listed Bank Negara Indonesia (BNI), the country's second largest bank, is set to issue sub-ordinated bonds worth up to Rp 1 trillion (US$117 million) in May or June, to help strengthen capital and finance credit expansion.

The move would form part of BNI's business plans, which included a rights issue and secondary offering later this year, president Sigit Pramono said on Wednesday.

"The bond offering will take place before the rights issue and secondary offering, and is expected to be worth between Rp 500 billion and Rp 1 trillion," Sigit said at a seminar here.

The bank and the underwriters for the bond issue JP Morgan and Bahana Securities were still discussing the exact amount, Sigit said.

The company has said earlier that it expected to rake in Rp 1 trillion from the rights issue, which means issuing new shares to be sold to public investors, while it also plans to raise cash to further strengthen capital by selling up to a 30 percent stake in the stock market under the secondary offering mechanism.

"But since the secondary offering will not take place until around September, the bond issue will proceed first in about May or June."

The proceeds of the bonds issue, expected to carry a 10-year maturity profile, would be used mostly to finance the bank's plan to extend this year's credit of Rp 6 trillion, higher than the Rp 5 trillion credit extended last year.

However, as to whether the rights issue and secondary offering would be executed separately or at the same time, Sigit said it would be decided at the bank's annual shareholders meeting.

As of last year, BNI outstanding credit totaled Rp 40 trillion.

For this year, about half of the total new credit target would be allocated for the corporate sector, while the credits for consumer and retail sectors would make up the rest, Sigit said.

This was all was part of efforts to meet the bank's income target of Rp 3 trillion for this year.

Aside from credit financing, the bonds issue proceeds would also strengthen the bank's capital, which was hurt by Rp 1.7 trillion in lending frauds last year.

The case had forced BNI to allocate Rp 1.3 trillion in provision, reducing the bank's capital.

This would be reflected in the 2003 financial reports to be issued in near future.