Danamon to delay bond sale

Danamon to delay bond sale

JAKARTA: PT Bank Danamon, Indonesia's fifth-largest lender by assets, may delay the planned sale of rupiah-denominated bonds to the end of next year because of an increase in borrowing costs.

The bank may also reduce the size of the sale to as little as Rp 1.5 trillion (US$153 million) from Rp 2.5 trillion, Lam Kun Kin, head of treasury and capital markets at Bank Danamon, said in Jakarta on Tuesday.

"We will have to delay it," said Lam. "We cannot do it this year because of the high interest rates."

The central bank, Bank Indonesia, raised its benchmark interest rate for the sixth time in four months on Dec. 6 to rein in inflation after the government raised fuel prices in early October. The rate, used as a reference for bill sales, was raised by half a percentage point to 12.75 percent.

Bank Danamon, 65 percent controlled by Deutsche Bank AG and Singapore's state-run investment company Temasek Holdings Pte, first delayed the sale on April 14, citing rising local borrowing costs. On Aug. 1, Chief Financial Officer Vera Eve Lim said the lender might go ahead with the sale in either September or early next year.

The lender will have to reappoint investment banks to help sell the bonds after previous mandates expired. PT Danareksa Sekuritas, PT DBS Vickers Securities Indonesia and PT Trimegah Securities had been hired to manage the sale.

Standard & Poor's ranks Bank Danamon's long-term rupiah debt BB-, three levels below investment grade. -- Bloomberg