Indonesia named best Yankee Issuer

JAKARTA (JP): The Euromoney financial magazine has named Indonesia as the "Best Yankee Issuer of the Year" for its inaugural Yankee bond issue of US$400 million earlier this year.

The London-based magazine said in its December edition's "Asia Best" supplement that the pricing of Indonesia's Baa/BBB-rated 10-year bonds, at 100 basis points above U.S. treasury bills, was considerably tighter than comparable and higher rated credits.

"For instance, bonds issued by China, which is rated higher than Indonesia, were at the time trading at 108 basis points over Treasuries," it said.

Bank Indonesia (the central bank), acting on behalf of the government, launched the $400-million Yankee bond issue on July 25. The issue, managed by U.S. investment bank Salomon Brothers, received a warm response, with 50 investors taking up the offer.

The magazine said Indonesia's first Yankee issue had met the government's objective of creating a large liquid Indonesian benchmark on the international market and helped lower Indonesian corporate spreads in the United States by more than 20 basis points.

The award was announced during an Asia-Pacific issuers and investors forum, organized by Euromoney, in Hong Kong on Dec. 2 and Dec. 3.

Bank Indonesia managing director Paul Sutopo Tjokronegoro said at the award ceremony that the government felt it was necessary to set a benchmark to would support private borrowing.

"By using this issue to set a benchmark, it was expected that there would be an immediate impact on the borrowing spreads for all Indonesian borrowers," Paul said in his response to the award.

"The existence of such a reference will help national borrowers looking overseas for funds to negotiate their terms and conditions with lenders and investors," he added.

The magazine wrote that the establishment of a sovereign benchmark would help those Indonesian companies -- particularly those producing pulp and paper -- that had successfully accessed high-yield investors in the U.S. market in recent years but had suffered from wildly fluctuating spreads.

Many of them had paid rates as high as between 600 and 700 basis points over U.S. Treasuries because of the absence of a sovereign benchmark and ratings.

One likely beneficiary from the new benchmark is Sampoerna International Finance Co., a financier for clove cigarette manufacturer PT HM Sampoerna.

The company this year issued $200 million worth of 10-year guaranteed notes at 145 basis points above U.S. Treasuries and with a Baa3/BBB investment-grade rating, the first Indonesian company to achieve this.

But the benchmark did not significantly affect the $195- million issue by PT Tripolyta Indonesia in November, which was priced 540 basis points over U.S. Treasuries. (rid)