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.