Govt ready to issue global bond soon

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.