Pegadaian turns to bonds, loans after IPO plan rejected

State-owned pawnshop Pegadaian has said it will rely on conservative funding from bond issuance and bank loans to support its lending after the government deferred the company’s plan to go public.

Pegadaian had been planning to go public during the second half of the year after it recently obtained status as a full business entity (PT), a requirement necessary for a company before floating shares on the bourse.

Pegadaian’s existence in the secondary market is expected to attract more investors as the company would be the first pawnshop to enter the bourse.

However, the State-Owned Enterprises Ministry recently said that Pegadaian’s initial public offering (IPO) should be thoroughly assessed.

The ministry said the IPO might result in Pegadaian being owned by highly profit-driven entities, which would contradict the pawnshop’s mission to serve the “small people”.

Pegadaian finance director Budianto said that the company would comply with the government’s decision.

He said that the IPO, seen as an easy source for raising funds, was just part of Pegadaian’s plan to seek more sources of finance this year.

The company normally relies on bank loans and bond issuances to secure funds for lending.

“According to our 2012 work and budget planning, we have two scenarios for fulfilling capital needs this year; an IPO and bond issuances. After the majority of shareholders decided to delay our IPO, we will continue to issue bonds,” Budianto said.

Pegadaian announced last month that it would issue bonds worth Rp 1 trillion (US$112 million) in February. The bond issuance was the second phase of a total of Rp 2 trillion bond issuance plan.

Pegadaian estimates that it will need up to Rp 7 trillion to run its business this year, Budianto said.

The first phase issuance amounting to Rp 1 trillion, which was divided in eight series with coupon rates ranging from 6.25 percent to 9 percent, was carried out last October.

The February bonds will be offered in four series with coupon rates ranging from 6.4 percent to 8.25 percent. Pegadaian will offer the bonds, which obtained an AA rating with a stable outlook from credit rating agency Pefindo on Feb. 9, will list them on the Indonesia Stock Exchange (IDX) on Feb. 15. The bond issuance will help the pawnshop raise funds needed for lending.

“We will further seek bank loans worth about Rp 3 trillion and will likely issue other bonds amounting up to Rp 2 trillion in the second semester of this year,” Budianto said.

“These plans will provide us Rp 6 trillion, which is actually enough to run our business. Another Rp 1 trillion is only aimed at additional funds to strengthen our business,” he said, adding that Pegadaian would also consider issuing medium-term notes (MTN) and participatory notes to raise additional funds. (rcf )