BPS postpones $100 million mortgage-backed securities

BPS postpones $100 million mortgage-backed securities

JAKARTA (JP): Publicly listed Bank Papan Sejahtera (BPS) has
postponed launching its US$100 million mortgage-backed securities
due to continued uncertainty over the country's monetary
situation.

Bank Papan president Al Nyoo said Saturday the launching of
was initially scheduled this month through the Jakarta Stock
Exchange.

But the bank decided to postpone it because the current
monetary upheaval could discourage investors from buying
securities, he said.

"We shall wait until the situation is back to normal," he
added.

Al Nyoo earlier said that issuing mortgage-backed securities
would help the bank to minimize financial risks in the property
sector as it would get longer term capital to finance property
projects.

It was very risky to finance property projects -- which are
long term investment -- with short term funds, he said.

He said the planned mortgage-backed securities, destined to be
the first issuance of the debt instruments by Indonesian
companies in the domestic market, would mature in five years and
carry an annual interest rate of some 15 percent to 16 percent.
Danareksa and Deutsche Morgan Grenfell, a subsidiary of the
Deutsche Bank, would be underwriters.

"We offer 15 to 16 percent because they have to compete with
bonds in the market," he said.

Unlike bonds which are backed by an issuing company, mortgage-
backed securities are backed by property assets or trust deeds.
Principal and interest payments on the underlying mortgages are
used to pay the interest and principal on the securities.

Regulations are still incomplete on issuing mortgage-backed
securities on Indonesia's stock market, especially on the
secondary mortgage market.

The 1996 Mortgage Law governs the use of land as security for
finance, but the government has yet to issue a supporting
regulation on the law.

The government is reportedly drafting the ruling to regulate
mortgage-backed securities transactions. (jsk)