BSM Issue IDR200 Billion Bonds

PT Bank Syariah Mandiri (BSM), the unit of PT Bank Mandiri Tbk, has planned to issue subordinated bonds of IDR200 billion.

The IPO of the bank will be in 2009. The President Director of BSM Yuslam Fauzi said Bank Indonesia has approved the bank's plan to issue the bonds.

"We hope that the offering process will be this month," he said last two week.

He said that with the issuance of the bonds, the bank's capital will increase by IDR100 billion so that its capital adequacy ratio will increase from 11% at present to 15% so that it will be easier for the bank to expand its business.

The regulation of Bank Indonesia has said that 50% of the cash from subordinated bonds issuance can be accounted into the capital structure of a bank.

In the bonds issuance, BSM has assigned its sister company, PT Mandiri Sekuritas, as the underwriter. Fitch Rating has granted A- rating for the bonds.

"We predict that we will be able to expand our credit by 30%-40% this year. We will meet the need on capital from the bonds issuance. To increase the capacity of our credit, we will also use the trade financing scheme from other parties."

The bank has got the latest trade financing from Islamic Development Bank as much as US$6 million. Yuslam also said that the IPO of the bank will be in 2009.

But if it is necessary, the bank will be ready to conduct the IPO in 2008. "It has been long time for us to prepare the IPO."

Fitch Ratings has granted A rating for BSM and A- for the subordinated bonds. The rating agency said that A rating reflects the dominant position of BSM in Indonesian sharia banking market as well as indicates the quality of the credits compared with those of other issuers.