Dec 9, 2010

Bank Danamon bond, saved by the bell

On 2 p.m today was a critical for settlement of Rp2.8 trillion bonds issued by PT Bank Danamon Tbk (BDMN), partly controlled by Singapore investment company Temasek.
It wasn't because investors pull out, but it was merely because of the settlement system which made one of the bonds underwriters was so frenzy to seek a temporary funding of Rp200 billion.
"The settlement system at Indonesian Central Securities Depository [KSEI] requires bonds crossing. It means underwriters need the money before they get the bonds for investors. When an investor intends to buy the bonds via the crossing transaction, the underwriters should put their money first," a source told Insider Stories.
Bank Danamon picked four lead underwriters for the bonds issuance, PT Indo Premier Securities, PT Standard Chartered Securities Indonesia, PT Danareksa Sekurita, and PT Kresna Graha Sekurindo Tbk.
Who was busy to seek funding?
Kresna Sekurindo was so busy to find Rp200 billion funding to meet the settlement. One of its investor,  a foreign bank, prefers to use the crossing transaction.    
"If Kresna failed to get the funding, it would disrupt the bonds settlement scheduled not more than 2 p.m. today. I don't think Kresna withdrew its deposit. It might obtain the funding from someone else," the source said.
On 3 p.m. today, I met one of Kresna executives at Pacific Place. When I told him that I heard the information saying one of corporate bond underwriters needed a Rp200 billion funding to close the settlement, he just said, "never heard about the rumor." 
Jack up the size
Bank Danamon determined to jack up its bonds issuance to Rp2.8 trillion from previous plan of Rp2 trillion. 
Standard Chartered Securities could close its book with Rp1.1 trillion order and the remaining was contributed by three other underwriters. "They completed their book with about more or less Rp500 billion each." 
The bank set the coupon on Rp1.88 trillion of 3-year bonds at 8.75% percent, and the Rp921 billion of 5-year notes carries an interest rate of 9%.
The bonds have obtained idAA+ rating and stable outlook from Indonesian rating agency PT Pemeringkat Efek Indonesia (Pefindo).
Bank Danamon will use 60% of the bonds proceed to support micro credit financing, 25% for small to medium enterprises, and the remaining for other credit portfolio.  

Disclosure: No position at the stock mentioned above. 
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