Seven firms to issue bonds before election: BES

Rendi A. Witular, The Jakarta Post, Jakarta

The Surabaya Stock Exchange (BES) said that seven companies planned to issue a total of Rp 2.7 trillion (US$321 million) in bonds before the presidential election on July 5.

"Seven companies have signed an initial listing contract with the bourse for bond issues before the presidential election. Their bonds have a total value of Rp 2.7 trillion," said BES director Guntur Pasaribu in a telephone interview on Wednesday

Guntur said the companies included PT Federal International Finance, PT Astra Sedaya Finance, state-owned PT Perkebunan Nusantara VII, Bank Buana, PT Ultra Jaya and PT Tunas Baru Lampung.

He said that since the start of the year only two companies had listed their bonds on the BES: PT Beta Inti Finance and state Bank Rakyat Indonesia (BRI).

Companies have been enthusiastic to issue corporate bonds since last year's high demand from both local and foreign investors for higher yielding investment alternatives as global interest rate fell.

As a source of financing for the corporate sector, issuing bonds is considered a cheaper alternative because of declining interest rates, and at a time when banks remain reluctant to increase lending to the sector.

However, Guntur said the BES had estimated corporate bond issues this year would reach between Rp 10 trillion and Rp 12 trillion, down from a record Rp 25 trillion last year.

This decline has been attributed to the upcoming general election and questions over political stability.

The country's largest retailer, PT Matahari Putra Prima, plans to launch its second five-year bond in mid-March to finance the opening of 12 new stores.

Matahari has not decided yet on the size or the coupon of the bond, but the amount will likely be below Rp 500 billion, an unnamed banker told Dow Jones Newswires.

The company has named Deutsche Securities and Mandiri Sekuritas as joint lead managers. The company is waiting for a rating from local rating agency PT Pefindo.

Matahari issued Rp 450 billion in five-year bonds in September 2002.

Elsewhere, Guntur expects the government to list its sovereign bonds on the Surabaya Stock Exchange to help improve the performance of the domestic bond market.

The government plans to issue its first international bonds in seven years on Thursday, and will list them on the Luxembourg bourse.

Investors expect the listing of the government bonds on the local bourse could become a yield benchmark for local companies, he said.