Govt hopes to profit from market goodwill with global issue

Govt hopes to profit from market goodwill with global issue

The Jakarta Post, Jakarta

Observing a favorable situation in the market in spite of the
recent bombings in Bali, the government confirmed on Tuesday it
would roll out this week its second global bond issue for the
year.

The bonds up for offer, Minister of Finance Jusuf Anwar said,
would consist of two series -- one with a common maturity term of
10 years, the other being Indonesia's first-ever 30-year bonds.

"The government has decided to enter the market this week," he
said. "We are even as of today (Tuesday) already in the market
for an international bond sale."

Jusuf said the decision was taken following optimism from the
joint lead managers for the bond sale over the market's positive
response to last week's fuel price hike, to help reduce the
burden from the fuel subsidies on the state budget.

"The fuel price hike has raised the confidence of the
international community that the government is consistent in
taking unpopular policies for the sustainability of the economy,"
he said.

The government had appointed Citigroup, Credit Suisse First
Boston and Merrill Lynch as the underwriters for the bond sale.

The joint lead managers, Jusuf added, also concluded that the
bombings last weekend on the resort island of Bali, which left at
least 22 people dead, would unlikely affect demand for the bonds.

"They were initially concerned, but it turned out that there
has been no major impact from the Bali bombings (on the
economy)," he said.

Jusuf declined to disclose further details of the bonds,
except that they would be in two series, with maturity terms of
10 and 30 years.

"The 30-year bonds will be a landmark. We have never issued
such bonds, but the market appetite for them is there," he said,
adding that the pricing and size of the global bond issue have
yet to be decided.

The government has earmarked a total of Rp 43 trillion (some
US$4.3 billion) in bond issues this year, to help plug the budget
deficit and refinance maturing bonds.

The government sold $1 billion worth of global bonds in April
-- its third ever issue -- at a yield of 7.375 percent.

Standard and Poor's (S&P) Rating Services said in a statement
on Tuesday that the bonds may amount to $1.25 billion, issued in
two tranches -- one of at least $750 million maturing in January
2016, and a second of at least $250 million maturing in October
2035.

S&P has assigned a rating of "B+" on the proposed global bond
issue, citing Indonesia's declining debt and debt-servicing
burden, as well as its track record of conservative fiscal
management.

Meanwhile, Fitch Ratings assigned a rating of "BB-" for the
bonds, referring to the government's commitment of maintaining
fiscal and macroeconomic stability, as well as to a strong reform
agenda.