Global case won't affect sub debt market: Analysts
Leony Aurora, The Jakarta Post, Jakarta
The Bank Global case, which could likely cause more than a dozen big bond holders to lose billions of rupiah, would not affect the subordinated debt market as it was caused more by "uncritical" investments, analysts say.
An economist at Standard Chartered Bank, Fauzi Ichsan, told The Jakarta Post on Tuesday that although subordinated bonds were legally weaker than other types of debts, investors would still look at them as attractive investments, especially when the issuer was well-known by the market.
"If the issuer is a publicly listed bank with big assets and whose owners are known, the notes will still be attractive," he said, defying concerns that the case would hurt the prospect for sub-debt issues.
The case was caused more by "investors who were not critical", added Fauzi.
A treasurer at a prominent investment firm, who prefers to remain anonymous, concurred, saying that as long as the issuer -- be it a bank or other institutions -- exercised good practices, they should not have problems in selling their sub-debt notes.
"If the rating is good and the underwriters are good, investors need only to review the (bank's) prospectus and check if it makes sense," said the source.
Bank Global, whose operations were suspended for a month on Dec. 14 by Bank Indonesia (BI), issued Rp 400 billion (US$44.30 million) of bonds in June last year.
The 10-year bond was given an A- rating by local rating agency PT Kasnic Kredit Rating Indonesia.
Bond holders include state-owned pension fund company PT Jamsostek (Rp 100 billion), pension unit of state oil and gas firm PT Pertamina (Rp 70 billion), and state insurance firm PT Jiwasraya (Rp 6 billion).
Should progress fail to be made during that period, Bank Indonesia has the right to shut the bank down.
If that happens, then holders of Global's sub-debts would more than likely end up empty-handed as a sub-debt is categorized as unsecured and their holders will be the last to be paid from the bank's assets should it get liquidated.
Jamsostek's investment director Samuel Tobing said that in general, the bond market would remain strong next year.
"As for sub-debts, it will depend on who is the issuer of the bonds."
Elsewhere, Fauzi said investors should consider the rating agency used to review the bond offering. "If it's Moody's, Standard and Poor, or Fitch, which are internationally recognized, it will likely give a proper rating," he said.
Several banks have announced plans to issue subordinated bonds next year. On Monday, Bank International Indonesia (BII) announced its plan to issue between $100 million and $200 million of sub-debt notes in January 2005 to strengthen its working capital.
Bank Negara Indonesia (BNI), the country's third largest bank by assets, has announced that it intended to put $300 million of such notes on offer in the second quarter of 2005, while Bank Niaga will issue $100 million by the end of February in the same year.