Mandiri set for RI’s biggest rights issue in three years

Bank Mandiri, the nation’s largest lender by assets, is set to offer rights shares that could be the biggest rights issue since March 2008, aiming to raise between Rp 9.3 trillion and Rp 14.4 trillion (US$1.6 billion) to back lending expansion.

Mandiri announced Tuesday the 2.34 billion new shares, which would be offered in the rights issue at the end of January through the beginning of February, would be sold at Rp 4,000 to Rp 6,150 a share. Mandiri shares close at Rp 6,450 Tuesday.

“Funds obtained from the rights offer will be fully used to strengthen the company’s capitalization structure, which will be used to expand the company’s business and loan growth,” Mandiri said in a statement.

The shares to be offered in the rights issue will account for 10 percent of the enlarged capital. As the government will not exercise its right to buy the new shares, its stake in the bank will be diluted by between 6 and 7 percent to about 60 percent, Pahala said, adding that after the rights issue, the public would hold 40 percent of the bank’s shares.

Aiming to grow its lending by 20 to 22 percent in 2011, the bank’s capital adequacy ratio (CAR) could plummet to below 12 percent, which Mandiri considered unsafe as the acceptable level is 12 percent, chief financial officer Pahala Mansury said.

With the rights issue, Mandiri’s CAR would increase to 16 percent from 12 percent at present, giving the bank more room to meet its lending growth target of between 20 and 22 percent, next year.

In addition to proceeds from the rights issue, Mandiri also expects another Rp 1 trillion from the sales of its 10 percent stake in Garuda Indonesia, which will launch its initial public offering in February.

State-owned Bank Negara Indonesia collected Rp 10.46 trillion in fresh funds through a rights offer earlier this month, the biggest this year. If Mandiri could sell its shares at the upper level of its price range, it could generate fresh funds amounting to Rp 14.4 trillion, the largest rights issue since March 2008 when Bakrie and Brothers successfully raised about Rp 40 trillion from its right issue.

“The rights offer will be well-subscribed because, in general, global liquidity is still high. It will still be interesting for existing shareholders because Mandiri has a good fundamental with loan-to-deposit ratio (LDR) that is still likely to expand,” said Nico Omer Jonckheere, vice president of research and analysis at Valbury Asia Futures.

Nico estimated the final pricing to be “a little bit above the middle of the set price range”, or above
Rp 5,000 per share.

In the third quarter of this year, Mandiri’s net profit jumped 38 percent to Rp 6.4 trillion on the back of higher fee-based income and strong loan growth. The lender had Rp 231.85 trillion in outstanding loans as of the end of September, a 23 percent increase compared to the same period last year. Mandiri’s shares have gained about 35 percent so far this year, while the broader benchmark Jakarta Composite Index climbed 40 percent. Mandiri has a total market capitalization of Rp 136 trillion, the fourth biggest in the nation’s stock market. (est)