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Tuesday, November 17, 2009

Multifinance issued IDR3.5 trillion bonds: Many issuances taking place in semester I/2010

as published in Bisnis Indonesia daily newspaper
Tuesday, 17/11/2009 00:00 WIB
Multifinance issued IDR3.5 trillion bonds
Many issuances taking place in semester I/2010

JAKARTA: Multifinance company bond issuance next year is estimated to surpass this year bond issuance value of IDR3.5 trillion due to the total matured bonds worth IDR4.5 trillion.

Data of the IDX up to October shows the bond issuance value of multifinance company stood at IDR3.5 trillion or 18.31 percent as from the total bond issuance of all sectors worth IDR19.1 trillion.

VP Financial Institution Rating of PT Pemeringkat Efek Indonesia (Pefindo) Hendro Utomo said the multifinance sector bond issuance will bolster the total bond issuance next year. The bonds here are predicted to exceed the issuance of this yearend with the estimated value of IDR32 trillion.

"The dynamics of multifinance company bond issuance is absolutely done as they continue to disburse credit particularly next year when the economy has better outlook than this year," he said to Bisnis this week.

The maturing bonds next year stand at IDR10.94 trillion of which some IDR4.5 trillion bonds will have the due date at the same period.

There are some factors determining the growing bond issuance here.

First, the prospect of multifinance credit channeling will grow up along with the rising expectation of car and motorbike sales in automotive sector.

Second, with the possible rise of interest rate by semester II/2010, the bond issuance windows in semester I will be higher than that of remaining period next year to cut down the issuance cost.

The cost is set from the offered coupon to the investors. Besides, the issuance will be favored by the mounting lending interest rate as multifinance will have more aggressive credit expansion.

The interest rate influences new corporate bond issuance as it is based on the offered coupons to the investors which will use yield of the government bonds (SUN) which moves along with the lending rate.

Higher rate will lead to the mounting SUN yield and thus lifts up higher the bond coupon which consequently will spend mor cost to pay the bond coupon.

Third, the growing interest rate will not influence the bond issuance value. Hendro said the financing will be more aggressive and concentrate more on the issuance in semester I. The company in this sector will compete for the chance to issue bonds at the same period.

However, there is possibility that multifinance sector seeks other more effective and efficient option other than bond issuance through public offering, namely the bank loan and medium term notes issuance (MTN).

MTN issuance has shorter tenure and more efficient if compared to the conventional bonds cost.

Besides, the more issuance of MTN this year tends to lure investors noting that there are some investment managers that cover the closely issued notes and change them into mutual fund.

The MTN issuance in previous years was far less than this year. Bisnis records the trend here is marked by the same notes issuance by PT Federal International Finance (FIF) worth totally IDR1 trillion and by PT Astra Sedaya Finance IDR500 billion.

President Director of PT Adira Dinamika Multifinance Stanley Setia Atmaja predicted the bond issuance value next year from multifinance company could be even higher by 15-20 percent than the matured bonds next year worth IDR4.5 trillion. This is due possibly to the fact that the company fails to shift it to bank loans. (Bisnis/21/mts)

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