Investment bankers see strong demand for RI global bonds

Investment bankers see strong demand for RI global bonds

Dadan Wijaksana, The Jakarta Post, Jakarta

Investment bankers said that the government's planned
sovereign bond issue this year should be met by strong demand
from investors amid favorable international and domestic economic
conditions.

The bankers, whose banks are in competition to be named the
underwriter for the bond issue, expected that the bonds would be
oversubscribed.

"They view the timing as being good as we are putting in a
good macroeconomic, fiscal and monetary performance at the
moment, supported by an improving world economy. They expect the
bonds to be fully taken up by the market," Bank Indonesia senior
deputy governor Anwar Nasution said on Friday.

Anwar is a member of the government team assigned to select
the underwriters.

The government commenced a two-day contest on Thursday to
select the underwriter to manage the bond issue. Citicorp,
Deutsche Securities, J.P. Morgan, Morgan Stanley and UBS are on
the list and have been invited to present proposals.

The government is expected to announce the winner on Tuesday.

This will be the country's first international bond issue
since the late 1990s financial crisis. The government late last
year said that it planned to issue around US$400 million worth of
sovereign bonds this year to help finance the 2004 state budget
at a time when Indonesia is no longer eligible to obtain debt
rescheduling facilities from the Paris Club after the country
graduated from the International Monetary Fund's bailout program
late last year.

But bankers participating in the selection contest suggested
that the government increase the size of the issue, and that the
issuance should be carried out in the first quarter of this year
before the start of the country's general election in April.

Some officials said that the government might only consider
increasing the bond issue up to $500 million. During non-binding
overseas roadshows last year, some institutional investors
suggested that the bond issue should be increased to $1 billion.

The bankers also suggested that the government select two or
three underwriters to manage the sovereign bond issue to help
ensure active trading of the bonds on the secondary market.

Anwar said that the investment banks had also suggested the
government set the tenor of the bond in a range of 7 to 10 years
with a yield of between 6 percent and 7 percent.

International rating agencies -- Fitch Ratings, Moody's and
Standard and Poor's (S&P) Ratings Services -- last year upgraded
the country's sovereign ratings. Although still below investment
grade, the move was seen as a vote of confidence in the economy,
which for the past year has seen a declining trend in domestic
interest rates, strengthening of the rupiah, easing inflation,
and higher foreign exchange reserves.

Aside from the sovereign bonds, the government is also
planning to issue around Rp 28.5 trillion (US$3.4 billion) worth
of bonds on the domestic market this year.