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Tuesday, December 28, 2010

Credit rating: 2011 corporate bond issuance up to IDR40 trio

Irvin Avriano A.
Bisnis Indonesia

Credit rating: 2011 corporate bond issuance up to IDR40 trio

JAKARTA: The rating agencies predict corporate bond issuance next year will exceed this year issuance that pegged around IDR40 trillion, higher from the expectations of the underwriter that projected around IDR30 trio next year.

PT Fitch Ratings Indonesia President Director Baraditta Katoppo says the projection is supported by the possibility of companies in the country will continue to expand, even with the bigger requirement of funds than which happen this year.

"The companies need high working capital, and bonds issuance could be alternative for them than to bank loans," he told the press earlier this week. Previously, some underwriter predict the bond issuance next year will still be at the level of IDR30 trio next year.

He said the issuance of corporate bonds will be crowded during the 2011 1st half, which anticipating rising interest rates by Bank Indonesia (BI), that predicted to be conducted in 2011 2nd semester.

However, he said, the potentially increased interest rates would not diluted interest from prospective bonds issuers to issue bonds in the second half of next year.

Baraditta said the intentions was due to the current domestic interest rates that remained stand at low levels, thus increasing BI rate to the level of 7% will not have significant effect on prospective issuers' interest who are still assessing the interest rate will still quite low.

In addition, he continued, a large interests from prospective issuers signs could be seen on the issuance of several bonds since early this year that much improved from the previous initial target issuance.

According to him, the increasing issuance shows the amount of increasing capability and interest from institutional investor on the debt-kind securities.

"For example, PT Bank CIMB Niaga Tbk bonds issuance increased from an initial target of IDR1.5 trio to IDR1.6 trio due to huge demand from investors."

He also explained that his rating agencies had pocketed at least IDR4 trio-5 trio rating mandate from future bond issuance in the next year.

PT Pemeringkat Efek Indonesia (Pefindo) President Director Ronald Tauviek Andi Kasim said the company has a higher internal expectations for the issuance of corporate bonds next year, even predicted to reach IDR43 trio next year.

"There will be much of corporate bonds issuance, particularly from the financial sector, which consists of multifinance finance and banking," he explained yesterday.

He explained that banking is still opening the possibility to seek additional capital funds through issuance of subordinated bonds next year, despite having a higher coupon than ordinary bonds.

Bank capital associated with the consensus of the Basel II that demanding improved capital and can be met from the corporate bonds issuance.

According to him, the optimistic prediction that higher-than-consensus is supported by projection from economists and some observers due to the financial world economic growth rate next year and the company's business climate in Indonesia is still high.

He added that currently Pefindo also still expect from another income from the diversification of products, offered to the debtor's credit rating for banks that are expected start to roll on next year.

"Just wait for referral or banking new regulations from Bank Indonesia, later interest for the new product in the credit rating could come from the debtor or even from the bank itself because it could give benefits for both parties."



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