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AKARTA: Publicly listed PT Bank Mayapada International plans to raise up to Rp 700 billion (US$70.83 million) in subordinated debts to strengthen its capital and support loan expansion.

'We're optimistic that we will reach the target funds raised, although it is unlikely there will be an oversubscription,' president director Hariyono Tjahjarijadi said on Monday at the company's headquarters, adding that the bonds were being offered until Friday this week.

With the bond issuance, the bank is targeting to increase the amount of loans it will channel by the end of the year by one-third of the 2012 figure of Rp 12 trillion.

The bonds, which have a seven-year tenure and carry a coupon range of 10.5 to 11.5 percent per annum, are rated BBB+ by PT Pemeringkat Efek Indonesia (Perfindo).

On its website, Perfindo defines the BBB rate of debt paper as having likely weakened capacity on the part of the obligor to its long-term financial commitments on debt security.

Setiawan Budiman, president director of Victoria Securities Indonesia, one of the two underwriters for the bond issuance, said the level of market
confidence for Mayapada's subdebt issuance 'is good' although the debt paper had a lower priority than other bonds in case of liquidation.

'It's a niche market that we'd like to go after. There are a number of institutions that want double-digit yields, but with risks that are relatively safe,' he said.