Bank Negara raises $774 million from placement

The share sale prices at the low end of the indicative range, but still tops the charts as one of the largest offerings from Indonesia.
PT Bank Negara Indonesia raised $774 million from its share sale yesterday, and if a greenshoe option is exercised, that amount could increase to $880 million.

JPMorgan and Bahana Securities were joint bookrunners for the offering, which is the largest equity deal in Indonesia in 12 years (since PT Telkom's IPO in 1995) and the largest follow-on offering ever.

The governmentÆs Ministry of State-Owned Enterprises sold about 3.48 billion shares in Bank Negara, which is the third-largest bank in terms of total assets, loans and customer deposits, for a price of Rp2,050 per share, at the low end of the indicative range of Rp2,050-Rp2,700.

In connection with the follow-on offering, the bank issued up to 1.99 billion new shares offered to existing shareholders through a rights issue. The price of the rights offer was Rp2,025. And so Bank Negara raised Rp.4.03 billion ($442 million) in fresh capital from the government sell down.

ôThe pricing was what investors were comfortable with, given the recent volatility in the market,ö said a source.

The price values the company at a pro forma price-to-book value of 1.67x for 2007.

Although there was no comment on how well the book was covered, people close to the deal say it was oversubscribed, ômostly out of Asia, with good representation from Europe and some from the USö. Institutional investors and long-only funds were attracted to the deal.

If the greenshoe of up to 473.9 million shares, or about 12% of the base offering, is fully exercised, the government will cut its stake in the lender to about 73% from 99.1%.

Bank Negara was established in 1946 as IndonesiaÆs central bank. Excluding micro-branches or village units of other Indonesian banks, it claims to have the most extensive branch network in Indonesia by number of branches û as of March 31, it had 918 branches, 53 ShariÆah branches, 47 small business centres, 17 medium business centres, 12 consumer loan centres and 2,325 ATMs. It also is the first Indonesian bank to establish an overseas office, with branches in Hong Kong, London, Singapore and Tokyo, as well as an agency in New York.

The bank says in an offering circular that it has increased its focus on the small, medium-sized and consumer markets, while it applies ôtargeted focus to our traditional corporate market segmentö. It also views the credit card business as one to focus on, as Indonesians still donÆt widely use credit cards, so itÆs a growth market. As of March, Bank Negara was the second-largest domestic credit card issuer in Indonesia, as measured by the number of cards issued with 1.2 million distributed thus far.

However, at Fitch Ratings points out in a June report, Bank Negara (along with Bank Mandiri) also has to grapple with big legacy loans. But Bank Negara is making inroads; its net NLP ratio amounted to 6.6% of its total loan book at the end of the first quarter this year, clearly cutting away at the 10.4% level recorded a year earlier.
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