RoI offshore bond foray continues with Samurai deal
The sovereign prints a five-tranche offering and managed to price the deal at their tight end of the range
6 Jul 2020 | Chito Santiago

THE Republic of Indonesia (RoI) continues to access the offshore bond markets to raise capital to help plug its budget deficit and fund its relief and recovery efforts against the Covid-19 pandemic.

After its fund raising in the US dollar and the euro bond markets on previous occasions this year, the sovereign decided to tap the Samurai bond market, pricing on July 2 a five-tranche offering totalling 100 billion yen (US$930.20 million). The deal, which was priced at par, comprised of a three-year bond amounting to 50.70 billion yen with a coupon of 1.13% and a re-offer spread of 110bp over yen swap offer (YSO). This was at the tight end of the initial price guidance of between 110bp and 120bp.

The second tranche was for five years amounting to 24.30 billion yen with a coupon of 1.35% and a re-offer spread of 130bp over YSO. This was also at the low end of the initial price range of between 130bp and 140bp. The third tranche was for seven-years amounting to 10.10 billion yen with a coupon of 1.48% and a re-offer spread of 140bp over YSO. This was likewise at the tight end of the initial marketing range of between 140bp and 150bp.

The fourth tranche was for 10 years amounting to 13.40 billion yen with a coupon of 1.59% and a re-offer spread of 145bp over YSO. This was at the tight end of the initial price guidance of between 145bp and 155bp. The final tranche amounting to 1.50 billion yen was for 20 years with a coupon of 1.80%, which was at the low end of the marketing range of between 1.80% and 1.90%.

The final pricing enabled the RoI to significantly reduce the average premium over its US dollar secondary curve across tenors and proved its standing as a leading Samurai bond issuer.

Over the three days of marketing, the RoI managed to narrow down the final price guidance to the tightest end of the initial range on the back of solid demand from Japanese and overseas investors. Considering the favourable factors and conducive market environment, the sovereign decided to print its benchmark size of 100 billion yen, which has been consistent since it made its debut on the public offering Samurai bond market.

In executing the deal, the RoI overcame a relatively quiet environment due to the virus outbreak. Since February this year, the Samurai bond market has not seen any issuance during March and April until around the end of May. The RoI’s transaction was the first sovereign Japanese yen issuance in 2020 and the first issue out of Asia following the pandemic declaration. The transaction has built momentum and confidence into the market, which would potentially lead to more deal supplies going forward.

The issuance attracted interests and orders from both existing and new investors from both Japan and overseas, of which 10 are new investors to Indonesia. The RoI provided investors with macro-economic updates and comprehensive coverage on its policies and actions made to counter the impact of Covid-19.

The bond distribution across tenors shows that asset managers accounted for 29.1% of the bonds, followed by city banks with 18.6%, life insurance companies 7%, Shinkin banks and regional banks 6.7%, pension funds 2.5%, property insurance companies 1.6%, and other investors 34.5%.

Daiwa Securities, Mitsubishi UFJ Morgan Stanley Securities, Nomura Securities, and SMBC Nikko Securities were the joint lead managers for the transaction.

The RoI’s latest bond deal came just two weeks after it raised US$2.5 billion in sukuk on June 16, which included a green tranche amounting to US$750 million.

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