Indonesian state-owned lender Bank Negara Indonesia (BNI) priced a $500 million five-year bond late Tuesday night — the first offshore dollar bond from an Indonesian commercial bank since 2003.
The bank had started marketing the bond to investors on Tuesday morning at mid to high 4%, despite the overnight weakness in Europe and the US. This was revised to 4.375% to 4.5% with the bonds pricing at the tight end. Credit Suisse, Deutsche Bank and Morgan Stanley were joint bookrunners.
The deal attracted an order book of $3 billion from 183 investors, with offshore US investors allocated a sizeable chunk (23%). The bonds also traded higher in secondary markets and were quoted 99.25, above the 98.888 reoffer on Wednesday morning.
However, one banker who had pitched for the deal and was not mandated expressed surprise that BNI printed at a yield above 4%. “We were asked to hard underwrite the deal and came back with an aggressive level and a low fee, and the client told us that other banks had agreed to underwrite at a level below 4%,” said the banker. “It was annoying to see it print above 4% — we don’t know if the client was being less than truthful or if there was a bait and switch.”
A banker on the deal denied that the deal was hard underwritten. Feedback from investors indicated that a price below 4% was simply too tight.
“BNI is a very different credit from Indonesia Eximbank — the government ownership is less,” said one investor on Tuesday evening, while the deal was being marketed. “It is not one of the strongest banks in terms of non-performing loans in Indonesia, so I think anything under 4% would be too tight.”
The Indonesia Eximbank 2017s were trading at around 3.8% on Tuesday.
The Republic of Indonesia has a 60% stake in BNI as opposed to Indonesia Eximbank which is 100% owned by the government through the Ministry of Finance. The former is a commercial bank whereas the latter is a policy bank. BNI was previously the biggest bank before the financial crisis of 1997.
Its bonds priced about 55bp wide of Indonesia Eximbank and 129bp wide of the Indonesian sovereign. By way of comparison, the more highly rated Korean commercial banks such as Kookmin Bank trade at around low-100bp over the sovereign while Brazilian commercial banks trade about 160bp wide of the sovereign.
Asset managers were allocated 45%, private banks 25%, banks 17%, insurers 9% and others 4%. Offshore US investors were allocated 23%, Asian investors 61% and European investors 16%.
There has been a flurry of Indonesian paper in the market. Indonesia Eximbank priced its $500 million bond last week while oil and gas company Pertamina concluded roadshows in London on Wednesday. Pertamina is rumoured to be eyeing a dual-tranche 10- and 30-year bond to raise $1 billion.
“I think the central bank should be coordinating this better — if they spread the issues out, they could get better pricing,” said a debt banker. “All the Indonesian borrowers are on top of each other. In Korea, the Ministry of Finance usually coordinates this.”