Republic of Indonesia to tap yen markets via JBIC-guaranteed bond, government source says

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The Republic of Indonesia is hoping to to issue a five to 10-year Samurai bond that would be guaranteed by the Japan Bank for International Cooperation [JBIC], an Indonesian government source told Debtwire.

A Japanese government source confirmed that JBIC has agreed to guarantee the bond, and noted that a government agency had on 7 April announced a guarantee for a yen-denominated bond from the Republic for up to USD 1.5bn.

The Samurai bond issue is likely to be for an amount of up USD 1.5bn, the Indonesian government source said.

The Republic had recently sent a request for proposals to leading underwriters, the Indonesian government source said, but he could not confirm the deadline for banks to respond to the request.

He noted that Indonesia’s recent Sukuk offering was overwhelmingly popular, and that the Republic was seeking to take advantage of the momentum that was building for international offerings.

“Indonesia has learned the from past [Asian] crisis and we have moved aggressively since the October [2008] global crisis to ensure we can we obtain funding,” so as to refinance existing debt, he said. The aim of these fundings has been to “smooth out” the Republic’s debt profile, so that there are no large debt repayments to be made in one go, said the government source.

As reported, Indonesia’s five-year 8.8% USD 650m 144A/Reg S Sukuk attracted an orderbook of USD 4.6bn when they were offered last week. Since it was priced on 16 April, the Sukuk has risen to trade at a high of 102, said two dealers. However, late today, it was indicated at 100 7/8 to 101 1/8.

The Samurai notes would have little effect on prices for the Republic’s US dollar issues because the yen-denominated bonds would likely be sold down to mostly Japanese accounts included retail investors, another source with knowledge of the situation said. He noted that Indonesia has not tapped the Samurai market in about fifteen years, and that the Republic has relatively little yen-denominated debt to be refinanced soon.

The Indonesian government source also noted the Republic has little yen-denominated debt that needs to be refinanced this year, but suggested that the proceeds of the Samurai bond could be used by Indonesia to help finance badly-needed infrastructure projects.

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