Under the lead management of JPMorgan, roadshows will move to Singapore today ahead of pricing scheduled for the middle of next week. While some might question the wisdom of launching such a lowly rated deal so soon after the Bali bomb blast, country specialists highlight that spreads appear to have normalised and a number of traders used the initial spread widening as an opportunity to buy.
So too with the approach of Ramadan and the end of year, BNI has a small but relatively clear issuance window to take advantage of.
Key to the pricing of the B3/B- rated deal will be whether it should come at a premium to Bank Mandiri, which commands the same rating and completed a $125 million 10 non call five issue in late July via UBS Warburg.
Priced at 99.147%, Mandiri's deal has a coupon of 10.625% and was priced to yield 10.85%, equating to 747bp over Treasuries, or 682bp over Libor. Yesterday traders reported the deal bid at 708bp over Treasuries, to yield 9.91%.
However, pricing may be affected by the adoption of a different strategy. Whereas Mandiri was determined to widen its investor base and targeted both Europe and the US, investors say that BNI is concentrating on Asia, where it knows it can achieve tighter pricing. Mandiri was also unlucky, in that its deal caught the year's first wave of volatile credit markets and a growing risk aversion, which temporarily took the shine off Asian high yield.
BNI, on the other hand, is much smaller than Mandiri and has slightly weaker ratios. At the end of 2001, Mandiri had an asset base of $30 billion compared to $14.4 billion for BNI and a CAR of 26.44% compared to 14.2%. It also reported net profit of $264 million versus $176 million for BNI.
For both banks, tapping the subordinated debt markets is viewed as a natural corollary to efforts to reduce their dependence on government re-capitalization bonds and increase their loan portfolios. As one specialist concludes, "As the banking business in Indonesia is normalized and lending resumes, banks will need progressively more capital."
