Govt ready to issue global bond soon

Rendi A. Witular, The Jakarta Post, Jakarta

The government is upbeat that the upcoming dollar-denominated bond sale, which may reach some US$1 billion, will rack up potential investors after senior government officials launched a non-deal roadshow to lure demand for the offering.

"With all preparations for the offering already intact, the government hopes to launch the global bond offering any time soon after the global capital market conditions are deemed favorable," Minister of Finance Jusuf Anwar said.

"After the recent roadshow, in which we received a very positive response from investors, we will go directly to the market as several key investors have already conveyed their interest," he said at the Presidential Palace on Wednesday.

Jusuf, however, refused to disclose the exact amount of the bonds, as well as the timing for the offering.

Several government officials, led by Jusuf and Bank Indonesia governor Burhanuddin Abdullah, met international investors this week in New York and London.

Jusuf said the government would now focus on seeking a window of opportunity to get good market conditions, good prices and a book-building process before it decided to offer the bonds, which would be the country's second overseas debt offering this year.

The government would not hold another roadshow for the bond offering, since the recent one was considered sufficient in attracting investors, he added.

The bond offering is aimed at plugging the state budget deficit this year, which is estimated to reach Rp 25.1 trillion (US$2.43 billion) or about 0.9 percent of gross domestic product (GDP).

The government has appointed Citigroup Inc., Credit Suisse First Boston and Merrill Lynch & Co. to underwrite the bond sale.

Aside from the positive response during the roadshow, Jusuf also indicated several concerns from the investors, especially about the nation's fiscal condition as a result of the burdensome fuel subsidy.

Before it can attract investors to the bond sale, the government will raise fuel prices by an average of least 50 percent on Oct. 1. to help avoid missing the budget shortfall this year and to keep the fiscal situation sustainable.

"Overall, investors were positive about our fiscal and monetary management with a declining deficit trend, tax reform proposal and a plan to adjust the fuel subsidy by raising fuel prices," said Jusuf.

The House of Representatives agreed on Tuesday night to raise fuel prices by capping the fuel subsidy to Rp 82.9 trillion this year, from an estimate of over Rp 120 trillion if the government decided to maintain current fuel prices.

The soaring fuel subsidy problem -- which has disrupted the country's monetary stability -- has prompted Standard & Poor's to lower its outlook on the country early this month from a positive B+ foreign-currency debt rating to "stable". The rating is four levels lower than investment grade.

Lower debt grades from rating agencies will drive up the government's cost in servicing the interest on the bonds, since investors usually demand higher yields in order to cover the risk of buying the bonds.