Lead manager ABN AMRO is expected to price a $200 million issue for government-owned nickel producer Aneka Tambang during Asia's morning today (Tuesday). The seven-year transaction with a four-year call option was originally supposed to have been completed last Thursday, then yesterday, but has encountered difficulties because of a re-pricing of the Indonesian credit curve.
A pipeline estimated to top $1 billion in the run up to Christmas and a poor secondary market performance by PT Perusahaan Gas Negara (PGN) have made investors more wary and created a difficult new issue environment. PGN, for example, has now traded down to 97% from an issue price of 98.669% at the beginning of September.
Hence indicative pricing on B3/B rated Antam has moved out from the 7.5% level to a final indicative range of 7.75% to 7.875%. Even at these levels, however, the company still hopes to price through the levels of Indofood, which has the same rating and a lot more credit recognition with investors.
During Asian trading yesterday, the noodle manufacturer's 10.38% June 2007 bond was yielding around 8.09%, equating to 498bp over five-year Treasuries, or 527bp over Libor.
Roadshows also began in Singapore yesterday for a $100 million to $150 million lower tier 2 deal by Bank Rakyat Indonesia (BRI). UBS is sole lead manager of the B3 rated deal, with presentations now moving to London, ahead of pricing towards the end of the week.
Given the deal's status as BRI's debut subordinated debt transaction, it will price at a premium to Bank Mandiri, which has worked hard to established a regular dialogue with investors over the past two years. As such, success will be a function of how close it can price to its larger domestic competitor and observers say the differential between the two is likely to be very slim.
Mandiri's 10.63% August 2012 issue callable in 2007 is currently yielding about 7.88%, equating to 477bp over Treasuries or 502bp over Libor. In turn, Mandiri is currently trading about 15bp wide of Bank Negara Indonesia (BNI), which has a 10% November 2012 issue callable in 2007.
Traders say that because both deals are illiquid, a premium between the two tends to alternate depending on who is short of bonds. Mandiri and BNI also share a very similar credit profile.
BRI, on the other hand, has financial ratios that make it appear more like a normal bank. It has, for example, a much lower ratio of zero risk weighted government re-capitalization bonds on its balance sheet. As of June 2003, roughly 31% of assets comprised government bonds compared to nearly 60% for Mandiri.
As a microfinance institution, it also enjoys high net interest margins of 8.9%, although analysts say competitors are now starting to try and move into this space. At the end of the first half of 2003, the government-owned bank also recorded the highest ROE in the Indonesian banking sector - 39.1%.
BRI currently has a capital ratio of 12.4% of which tier 1 comprises 10.2%. In its ratings assessment, Moody's says that, "additional capital would be positive for the risk profile of the bank to match the rapid growth and to counterbalance Indonesia's often volatile operating environment."