Indonesia shortlists banks for benchmark bond

The Republic of Indonesia has shortlisted banks for its benchmark bond and is expected to mandate three or four bookrunners after hearing presentations later this week.

The Republic of Indonesia (ROI) has shortlisted seven to eight banks for its upcoming benchmark bond. The banks that have been shortlisted are said to include Barclays Capital, Citi, Deutsche Bank, HSBC, J.P. Morgan, Standard Chartered and UBS.

It is unclear if Credit Suisse – a bank that many consider a key contender for any deal involving the Republic of Indonesia – is also on the shortlist.

The deal will be the sovereign’s first global bond under its new finance minister Agus Martowardojo, who replaced Sri Mulyani Indrawati in May last year. The reshuffling is expected to add some uncertainty to the selection process.

The request for proposals (RFP) was sent out to some 15 banks before the Lunar New Year holiday and proposals were due for submission on February 4. Banks that made the shortlist were notified earlier this week.

The shortlisted banks will be giving presentations in Jakarta on Thursday and Friday and the sovereign is eventually expected to mandate three or four banks.

Since it last tapped the US dollar bond market just over a year ago, Indonesia’s fundamentals have been on a firm improvement path. Moody’s last month upgraded Indonesia’s sovereign credit rating by one notch to Ba1 with a stable outlook. The ratings agency cited the country's continued economic resilience, stronger macroeconomic balance and improved public debt position as some of the reasons for the upgrade.

Based on Moody’s Ba1 rating and Fitch’s BB+ rating, the sovereign is just one step away from investment grade status. However, Standard & Poor’s rates the ROI two notches below investment grade at BB. In December last year, S&P said that Indonesia still has some way to go before it achieves an investment-grade rating.

According to one banker, the ROI is considering issuing a dual-tranche 10- and 30-year bond. However, another banker noted that it was premature to conclude this ahead of the bank presentations later this week.

This is not the first time the ROI is considering a 30-year bond. In January 2010, when the sovereign last tapped the US dollar bond market, there was talk that it would issue a 30-year tranche, but this did not materialise.

Instead, it printed $2 billion of 10-year SEC-registered bonds with Barclays Capital, Citi and Credit Suisse as the arrangers. The deal drew some controversy as the print was smaller than the $3 billion to $4 billion that had been rumoured and because the 30-year tranche had gone missing.

“If they issue a 30-year bond, it would be interesting to see how it goes as the last time they attempted to do so, it wasn’t very successful,” said one banker.

The ROI had also planned to issue a global sukuk last year and had mandated Citi, HSBC and Standard Chartered. However, it chose not to go ahead with the deal. However, in November it did go ahead with a ¥60 billion ($730 million) 10-year Samurai, arranged by Nomura and Daiwa.

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