Govt to soon name global bond's lead underwriters
The Jakarta Post, Jakarta
The government is pressing ahead with its sovereign bonds issue plans, saying it had received proposals from 14 investment banks to underwrite the issue and would name the lead underwriters in less than two weeks.
"We'll decide on the lead underwriters by Jan. 20," Herwidayatmo, a member of a government team assigned to prepare the issue, was quoted as saying by Dow Jones on Friday.
None of the 14 were mentioned, but the news agency cited Citicorp, HSBC, Deutsche Securities, J.P. Morgan, ING, Morgan Stanley and UBS as likely candidates.
The government is planning to issue bonds worth some US$500 million on the international market this year as an alternative source of funding to help finance the 2004 state budget deficit, estimated to be 1.2 percent of the country's gross domestic product (GDP) this year.
The state budget initially set the figure at $400 million, but the government has increased the size due to higher demand than earlier expected for the bonds. The decision was made after the government claimed it had received positive responses from international investors during two overseas roadshows last year. It is the first bond issue by the government since the 1997 financial crisis.
There is now speculation that the government might increase the size of the issue to up to $1 billion due to the strong demand.
Investors' interest in Indonesia has been on the rise lately given the country's slowly-but-steadily improving economy, notably its newfound stability in several key macroeconomic indicators.
A rupiah that has stabilized relative to the weak dollar, benign inflation and declining trend in the central bank's benchmark interest rate have managed to improve the country's sovereign ratings.
Late last year, international rating agency Fitch Ratings upgraded the country's sovereign rating with a stable outlook, citing improving economic stability. It was followed by similar moves by Moody's and Standard and Poor's (S&P) Rating Service.
Although the country's rating remains below investment grade, the move should be seen as a vote of confidence in the economy.
The government is making strenuous efforts to seek as many sources of funds to chip away at its massive deficit this year as the government ended the International Monetary Fund (IMF) program in December.
Exiting the program makes the country ineligible for the debt rescheduling facility from the Paris Club of creditor nations and the London Club of private creditors, meaning that the government must now fully repay any maturing sovereign debts.
Additional pressure on the state budget will also come from a maturing government domestic debt, estimated at Rp 24.7 trillion for this year alone.