Govt to refinance maturing bonds

The Jakarta Post, Jakarta

The government will offer investors the chance to swap any bonds maturing between 2006 and 2009 with those due in 2020 through an open auction on Thursday, the Ministry of Finance said in a statement on Wednesday.

The government will accept the lowest bids that bondholders submit through 25 registered banks and securities firms during the auction, which will be held by the Ministry of Finance from 10 a.m. to 1 p.m.

Winning bidders will be announced at 4 p.m.

Bondholders winning the bids will be entitled to buy the government's FR0031 bonds, maturing on Nov. 15, 2020, at a price of 79 cents a dollar and with a coupon rate of 11 percent.

The government did not specify how many bonds it intends to repurchase and swap, or at what yield level.

Global credit rating agency Standard and Poor's assigns Indonesia's long-term local currency debt a BB rating, which is two levels below investment grade. Moody's Investors Service, meanwhile, rates Indonesia's rupiah debt at B2, or five levels below investment grade.

The government has been refinancing its bonds through buybacks and maturity-extending swaps, as part of its efforts to restructure Indonesia's bond portfolio, which between 2007 and 2009 is expected to reach its peak for maturing bonds.

During the period, the government may face the risk of having to pay up to Rp 40 trillion in due bonds if they are not refinanced.

From a total of Rp 43 trillion (some US$4.3 billion) in revenues from bond sales that the government has planned for this year, some Rp 21 trillion has been set aside for refinancing efforts.

For next year, the government has earmarked Rp 24.9 trillion in net revenues from bond sales to help finance the state budget deficit.