Dharmala defaults on samurai bonds
Dharmala defaults on samurai bonds
TOKYO (Bloomberg): Dharmala Intiutama International BV, part of an Indonesian financial conglomerate, has defaulted on 15 billion yen (US$116 million) of samurai bonds, according to the six banks that distribute payments to investors.
The Dutch financing subsidiary of Indonesian insurance and financial services conglomerate Dharmala Intiutama is only the second-ever to default on a public issue of samurai bonds.
Samurai bonds are yen-denominated bonds that foreign governments and corporations sell in Japan.
"The bonds have been declared to be in default," Haruhiko Kimura, a spokesman for Sanwa Bank Ltd, the chief commissioned bank, said Tuesday.
"The next step is for commissioned banks to look at various options available in recovering investors funds," he added.
Investors holding more than 50 percent of the issue requested the commissioned banks to officially declare default status for the 5.45 percent bonds due in 2002, after the borrower failed to make a scheduled interest payment on July 9.
Declaration of default makes it possible for corporate investors to write off their holdings as loss, according to Sanwa's Kimura.
On April 16, The Japan Rating & Investment Information Inc., the only company to rate the bonds, had lowered its credit rating on Dharmala's samurai bonds to "C," a rating reserved for defaulted bonds, from "CCC," or junk-rated bonds.
A default could cause hardship for investors as Yamaichi Securities Co, which underwrote the yen bonds, and Peregrine Investments Holdings, the Hong Kong investment bank that underwrote the dollar bonds, have both closed after going bankrupt.
Dharmala's default marks the second default of a samurai bond, following that of Peregrine Investments Holdings Ltd on March 27.
In the case of Peregrine's default, few Japanese investors suffered financially because Nikko Securities, the lead manager for the Peregrine samurai bonds, owned more than half of the issue, a fund manager in Tokyo and a dealer in Hong Kong told Bloomberg News in January.
Some of Dharmala's bonds were sold to Japanese individuals after some institutional fund managers turned them down as too risky, an official at a Japanese securities company said in April with a request not to be identified.
"Debt rescheduling negotiations for Indonesian banks and foreign lenders are yet to be resolved, and negotiations for corporate debt are just about to begin," said Sanwa's Kimura.
"In light of this, it may be unrealistic to expect quick developments, for example, within a week, just on Dharmala Intiutama's debt," he added.
Besides Sanwa Bank Ltd, the commissioned bank group includes Fuji Bank Ltd, Long-Term Credit Bank of Japan Ltd, Industrial Bank of Japan Ltd, Yasuda Trust & Banking Co, Ltd and Orix Trust & Banking Co Ltd.