Foreign banks eye Bank Mandiri's IPO business

Foreign banks eye Bank Mandiri's IPO business

JAKARTA (JP): President of the giant Bank Mandiri E.C.W. Neloe
said on Tuesday that several foreign investment banks had
sweetened their offers in a bid to win the underwriting business
of the state-owned bank's initial public offering (IPO).

Neloe said that the incentives included a loan of up to US$100
million or the purchase of the bank's recapitalization bond worth
up to $300 million.

"This will provide a multiplier effect to our IPO," he told
the House of Representatives commission IX on state budget and
finance during a working meeting.

"We hope you (the legislature) will support our IPO plan," he
added.

Bank Mandiri plans to sell around 30 percent of its stake
through IPO sometime in October in a bid to raise around $600
million.

"We expect 80 percent of the IPO will be subscribed by foreign
investors," Neloe said, adding that the bank planned a dual
listing at home and abroad.

Several foreign investment banks have indicated their interest
to become the lead underwriter of the IPO. The banks include
Deutsche Bank, Lehman Brothers, JP Morgan, Merrill Lynch, ABN
Amro, Salomon Smith Barney, and C.S. Boston.

Neloe said that Bank Mandiri would only appoint one lead
underwriter for the overseas offering and one local firm for
domestic offering.

The $100 million loan, if the government and Bank Mandiri
choose to accept it, would be the first such loan of that size
offered by a private foreign creditor to local entities since the
economic and financial crisis started in the middle of 1997. This
would not only benefit the bank but would also help encourage
other lenders to resume lending to local companies.

The purchase of bank recapitalization bonds would help the
government in its efforts to activate the local bond secondary
market.

Elsewhere, Neloe told legislators that the IPO must be
implemented this year because if it was delayed until 2002, the
IPO market would be flooded by other similar IPOs particularly
from China.

Neloe also expected the government to allow the IPO to be
launched as a primary issue, in which all the proceeds would be
used for the bank's capital, not for financing the state budget
deficit.

"We are proposing a primary issue. The government can raise
cash through a secondary issue at the latter stage," he said,
adding that Bank Mandiri had yet to obtain government approval
for the primary issue plan.

He said that investors would be attracted to the IPO if it was
launched as a primary issue.

Texmaco

Meanwhile, Neloe confirmed reports that four companies of the
integrated textile giant Texmaco group had asked for a $60
million loan facility from the bank to finance the supply of
trucks and buses by the government for military and civilian use.

But Neloe said that the bank had not yet decided whether to
approve the credit demand, saying that the bank would first talk
with the Indonesian Bank Restructuring Agency (IBRA) over the
restructuring of Texmaco debt owed to the agency.

"We also want a senior lender status," he added.

Texmaco had been hit by controversy after a minister late in
1999 alleged the group used its political clout to force a state
bank to provide a massive loan.

The restructuring of Texmaco's huge debt to IBRA had also been
criticized because of the seemingly favorable terms for the
debtor. (rei)