BRI issued IDR2 trillion subdebt

PT Bank Rakyat Indonesia Tbk (BRI) plans to issue IDR2 trillion sub debt this year and to suspend the dollar denominated bonds issuance worth US$300 million up to next year.
Director of BRI Abdul Salam said the company has processed the appointment of underwriter to help ease bond issuance here.
"We are preparing sub debt issuance process," he said to Bisnis last week.
The sub debt issuance will increase the corporate capital adequacy ratio (CAR). "The ability of BRI for expansion will be increased both organically and inorganically."
Abdul Salam said the global bond issuance by BRI is likely to be suspended until next year.
"We are waiting for the better financial market situation so the global bond issuance by the company will not result in high coupon value. The plan is likely to be materialized next year."
The sub debt here serves as an alternative for bank to boost up the CAR. Half of the bonds issuance proceeds will be allotted to second tier so the CAR of a bank could be bolstered.
The sub debt has the equal rights (paripasu) with all the existing and the would-be sub debts.
But the bonds have junior claim if compared to the deposit obligation claim and other claims owned by bank, except there is obligation of certain terms and conditions with the same or junior claim as the sub debt.
The sub debt is commonly issued with 10 years tenure with buy option at the fifth year. Would the option be left unrealized, the coupon could rise 10 percent so the bond issuer will have the rights so the effective tenure of the bonds will only be five years.