[Kabar-indonesia] Bloomberg: PLN Sells US$1B in Debt, Indonesia's Biggest Overseas Such Deal

[Joyo at aol.com]

Listrik Sells US$1 Billion in Debt, Indonesia's 
Biggest Overseas Corporate Debt Sale 

By Denise Kee and Aloysius Unditu

October 12 (Bloomberg) -- PT Perusahaan Listrik Negara, Indonesia's
state electricity company, sold $1 billion of bonds in the nation's
biggest overseas corporate debt sale, a sign of confidence in the
country's economic recovery.

Investors applied for $6 billion in bonds, allowing the state-run
company to borrow at 10 basis points less than its initial target,
said a person familiar with the transaction, who declined to be
identified. The Jakarta-based utility's 10-year debt was sold at a
yield of 7.9 percent, 144 basis points more than similar-maturity
Indonesian government bonds.

Indonesia's companies were unable to sell debt overseas for three
years after the 1997-1998 Asian financial crisis when the rupiah lost
about 80 percent of its value, leaving many borrowers unable to pay
debt. The sale bodes well for the $700 million in planned Indonesian
corporate debt sales.

``A successful big issue like this shows there is a market appetite
for Indonesian risk,'' said Low Guan Yi, who helps manage $1.1 billion
of global emerging debt in at Pictet & Cie in Singapore. ``We will
definitely see more companies issuing bonds out of the country,
including those affected by the previous debt restructuring.''

Growing Economy

Indonesia's debt rating was raised one level to B1, four steps below
investment grade, by Moody's Investor Service in May because of the
government's ability to meet budget targets. A higher debt rating
helps lower borrowing costs.

Listrik Negara raised the money to boost power-generating capacity and
alleviate shortages in Java, Indonesia's most- populous island, as
economic growth accelerates. The government forecasts Southeast Asia's
biggest economy will expand 6.3 percent next year after estimated 5.8
percent growth in 2006.

The state-owned company sold $450 million of five-year bonds priced at
a yield of 7.4 percent, lower than the guidance of 7.5 to 7.75 percent
provided to investors, the person said. The company sold $550 million
of 10-year bonds at a yield of 7.9 percent, lower than the 8 to 8.25
percent guidance.

Indonesian sovereign bonds maturing March 2017 are yielding 6.458
percent as of Oct. 11. A basis point is 0.01 percentage point. More
than 70 percent of the bonds were bought by bond funds, with less than
15 percent going to banks, the person said.

Ratings

``In the eyes of dedicated emerging market investors, this yield
pick-up is particularly juicy,'' said Ken Hu, who helps manage $100
billion of assets including $45 billion of debt at First State
Investments in Hong Kong.

Listrik Negara's bonds are rated BB- by Standard & Poor's, three steps
below investment grade. Moody's Investor Service rated the debt B1,
the fourth highest non-investment grade, the same rating as
Indonesia's sovereign debt.

``It is still state-owned, which gives it the status of
`quasi-sovereign,' and makes it easier to compare pricing with the
sovereign bonds of Indonesia,'' said Nicolas Schlotthauer, who helps
oversee $4 billion of emerging-market debt at DWS Investment GmbH in
Frankfurt.

UBS AG, Switzerland's largest bank, and Jakarta-based PT Danareksa
Sekuritas were hired to arrange the sale and sold about 70 percent of
the bonds to investors in Europe and the U.S., the person said. More
than 250 investors bought the bonds, the person said.

Higher Yields

The five-year bonds were priced at 216 basis points more than the U.S.
mid-swap rate or 266 basis points more than the U.S. Treasuries. The
10-year bonds were priced at 257 basis points more than the U.S.
mid-swap rate or 313 basis points more than the U.S. Treasuries,
according to the person.

The five-year U.S. mid-swap is at 5.24 today, and the 10- year
mid-swap is at 5.329 percent. The 10-year U.S. Treasury yields 4.78
percent and the five-year yields 4.74 percent.

The country with a population of 242 million people across thousands
of islands, needs to spend about $27 billion on new plants and power
lines by 2012 to meet demand, the World Bank has said.

Listrik Negara's bond sale follows PT Bumi Resources' $900 million
offering of floating-rate notes earlier this month.

Hobbled by a government cap on power prices, the utility doesn't have
funds to upgrade its aging network. Listrik's loss narrowed to 2.26
trillion rupiah in the first half from 4.52 trillion rupiah a year
earlier, the company said in the prospectus. It has an installed
capacity of 22,725 megawatts and counts about 35.2 million people as
customers.

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Joyo Indonesia News Service
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