BII will sell US$250 million bonds

PT Bank Internasional Indonesia Tbk has studied option to issue subdebt worth US$200-250 million in 2010.
President Director of BII Ridha Wirakusumah said the scheme here has been proposed to Bank Indonesia for seeking approval.
"We have made coordination with BI for the scheme," he said last week.
He said on April 28 next year BII will pay call option of matured subdebt worth US$150 million.
"Actually there is already allocation for call option payment but if it uses internal cash, our capital adequacy ratio could drop into 15 percent."
Ridha explained the company could decide not to execute the matured bond call option. But would BII subdebt call option be not executed, the bond coupon will climb up."
Based on the agreement, BII should pay the coupon if there is no call option execution on the US Treasury interest rate plus 7.424 percent per year.
Subdebt bond has become alternative among banks to boost up the CAR. Half of the bond issuance could be used for the entrance to second tier so the CAR of a bank is increasing.
Subdebt bonds are commonly issued with 10 years tenure but with buy option in fifth year. When the option is not materialized, the coupon could rise 10 percent so the issuer tends to use their rights.