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January 30, 2009

Indonesia to launch global bond next week

Indonesia gears up for a global bond sale and will start marketing the deal to investors next week, Reuters quoted three sources familiar with the details as saying Thursday, extending a revival in debt sales from Asia.

The presentations will brief investors about Indonesia's recently announced global medium-term note, or GMTN, programme of up to $4 billion.

Indonesian finance ministry officials will start investor meetings in Europe on Monday, and will move on to the United States within the week, said one of the sources, asking not to be identified because the plans have not been made public.

The meetings will conclude in Asia, with stops in Singapore on Feb. 11 and Hong Kong on Feb. 12, said the source, who declined to say which other cities will be targeted.

A global bond sale could come at any time, during or after the investor presentations, and no decision has been made about size or maturities, said the source.

"We can't say whether there will be a deal after that," said the source. "We are allowed to tap the market at any time."

A fixed income investor invited to the briefings said Indonesia was eyeing a global bond sale of around $2.5 to $3 billion, consisting of several tranches, though he also specified that the targets were preliminary.

Several Asian issuers have raised the size of their debt sales this year after attracting strong demand on the back of the high premiums they offered and the improved risk appetite among investors.

Philippines sold $1.5 billion in dollar-denominated debt this month, followed by state-owned lenders Export-Import Bank of Korea and Korea Development Bank with $2 billion each.

Indonesia is in the midst of selling its first retail Islamic-compliant bonds -- offering three-year debt at a coupon of 12 percent -- as part of efforts to finance a 2009 budget deficit targeted at 2.5 percent of gross domestic product.

Standard & Poor's on Thursday rated Indonesia's GMTN plan as BB-minus, in line with the country's sovereign ratings and three notches below investment grade. Fitch rated the planned bond issuance one step above at BB.

Still, any bond issuance from Indonesia is unlikely to be cheap after the country already raised $4.2 billion in dollar denominated debt last year via two sales.

Although Indonesia's public debt-to-GDP ratio has steadily fallen to about 30 percent last year, the cost of protection against a default in its sovereign debt has surged on concerns about its economy, especially about weakening commodity exports.

The finance ministry this week proposed an economic stimulus package worth 71.3 trillion rupiah ($6.3 billion). The government has forecast growth will slow to 4.5-5.5 percent in 2009, down from an estimated 6.2 percent last year.

The country's five-year credit default swaps traded at 580 basis points on Thursday, above the levels around 150 bps a year go, though well below a record of around 1,200 bps hit in late October.

Barclays Capital and UBS are arranging the presentations for Indonesia.

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