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BNI to get windfall from RI’s rating upgrade
Bond of brothers: Bank Negara Indonesia (BNI) director Imam B
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span class="inline inline-center">Bond of brothers: Bank Negara Indonesia (BNI) director Imam B. Sarjito (from left to right), director Rico Rizal Budidarmo, director Putrama Wahju Setyawan, director Herry Sidharta, director Panji Irawan, director Bob T. Ananta and director Catur Budiharto chat before the lender holds a due diligence on its bond issuance plan in Jakarta on Wednesday.(Antara/Audy Alwi)
State-owned lender Bank Negara Indonesia (BNI) is predicted to get a windfall from Indonesia’s recent rating upgrade by rating agency S&P Global Ratings for its bond issuance.
The publicly listed lender is currently offering Rp 3 trillion (US$225.44 million) in bonds under a shelf registration scheme that amounts to Rp 10 trillion in total.
Shelf registration is a type of public offering that allows issuers to sell securities to the public without a separate prospectus for each offering.
Under such a scheme, the issuer need only offer a single prospectus for multiple, undefined future offerings.
BNI’s five-year bond is rated AAA by state credit agency PT Pemeringkat Efek Indonesia (Pefindo).
The appointed underwriters are PT Bahana Sekuritas, PT BCA Sekuritas, PT BNI Sekuritas, PT Danareksa Sekuritas, PT Indo Premier Sekuritas and PT Mandiri Sekuritas.
BNI plans to use the proceeds to expand its loans disbursement. BNI president director Achmad Baiquni has expressed confidence that the bank’s loan growth can hover between 15 percent and 17 percent by the end of this year.
It saw its loan channeling soar by 21.3 percent in the first quarter of this year to Rp 396.52 trillion compared to the same period last year.
Given the bank’s status as a state-owned enterprise with a good rating and prudent financial ability, there is a possibility that the bond issuance will be well responded to by investors, Mega Capital Indonesia fixed income analyst Adra Wijasena said.
“There is also a possibility that the yield will be lower [than previous estimates], especially after the S&P credit rating upgrade that will trigger a decrease in government bond yields.”
S&P lifted Indonesia’s sovereign rating to BBB- from BB+ with a stable outlook last month, more than five years after rating agencies Moody’s Investors Service and Fitch Ratings upgraded the country’s rating.
At present, the yield of five-year government bonds is around 6.77 percent per year, according to Indonesia Bond Pricing Agency (IBPA) data.
An ideal yield spread between the government and corporate bonds for such a tenure is 167 basis points (bps), thus BNI’s debt paper is expected to have a yield of around 8.44 percent, Adra said.
BNI announced in a public expose on Wednesday that the debt papers will have a yield ranging from 7.7 percent to 8.2 percent per year.
BNI treasury and international director Panji Irawan said it could probably hold the second issuance in between October and December. “The amount will depend on the speed of our loan disbursement,” he said.
BNI is also assessing a plan to issue global bonds in rupiah denomination, but no details are available yet.
Other than by issuing bond, BNI is looking to source funds by withdrawing its bilateral loan worth of $500 million in August at the latest to further support its business expansion.
In a separate event, Mandiri Sekuritas bond analyst Handy Yunianto said Indonesia’s bond market seemed bullish this year.
Mandiri based its conviction on forecasts that Bank Indonesia will not increase its policy rate, inflation will be manageable and more inflows will occur.
Handy recommended that the government attract more foreign direct investments. “The responsibility [for the government] now is to make those funds stay longer in the country,” he said.
Bahana Sekuritas president director Feb Sumandar previously said the state securities firm would handle around 40 corporate actions, more than 30 of which are bond issuances, in 2017. It only managed 20 corporate actions last year.
The rating upgrade will, among other things, open doors to a wider investor base and lead to increased fund inflows, drive up rupiah value on the back of strong investment flows and improve overall corporate profitability, supported by lower costs of funds, Mirae Asset Sekuritas Indonesia research head Taye Shim said.
However, it will take some time for investors to look at Indonesia and execute the buy on their portfolios.
“A continuing upgrade has more effects than any one-time upgrade,” he said recently.
