Moody’s Assigns (P)Baa3 Rating to Indonesia’s Samurai Bonds
The Samurai (yen-denominated) bonds that are to be issued by the Indonesian government (through private placement) received a provisional rating of (P)Baa3 (stable outlook) from Moody’s Investors Service. Part of the Samurai bonds to be used by the government are without guarantees from the Japan Bank for International Cooperation (JBIC). It will be the first time for Indonesia to issue unguaranteed Samurai bonds since 1983 and thus the issuance serves as a test to measure Japanese investors’ confidence in Indonesian assets.
The Indonesian government raised 100 billion yen (approx. USD $800 million) from Japanese investors, which would be the largest ever bond sale involving Samurai bonds. The issuance involves three-year unguaranteed bonds (RIJPY0818 with a coupon of 1.08 percent) and five-year unguaranteed bonds (RIJPY0820 with a coupon of 1.38 percent) and 10-year bonds that are guaranteed by JBIC (RIJPY with a coupon of 0.91 percent). About 65 percent of total Samurai bonds issued are guaranteed ones. Proceeds from the issuance will be used to finance infrastructure development in Indonesia. The sale of the notes is managed by MBC Nikko Securities, Nomura Securities and Mizuho Securities.
Previously, Indonesia issued Samurai bonds in 2009, 2010 and 2012. All of these bonds were guaranteed by JBIC.
Moody’s gave a (P)Baa3 rating as Indonesia’s fiscal deficits have narrowed, the country’s low indebtedness, the large size of the economy, and healthy future GDP growth prospects. However, Moody’s also stated that the country’s is characterized by institutional weaknesses, while financing conditions are susceptible to external volatility because non-residents holdings form a relatively high proportion of government securities.
Today (04/08), Indonesia's Finance Ministry also announced it sold IDR 15 trillion (approx. USD$1.11 billion) worth of conventional bonds. This result was above an indicative target of IDR 10 trillion. Total incoming bids were IDR 28.062 trillion and the highest bid-to-cover ratio was 2.65 for the three-month T-bills.