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)