State Pawnshop Pegadaian Plans Rp 2.5t Bond Issuance
ID/Elizabeth Gloria Brahamana
State-controlled pawnshop operator Pegadaian plans to sell Rp 2.5 trillion ($265 million) worth of bonds in the first quarter next year to allow it to boost its lending.
“We are still discussing the mechanism, determining whether it will be done in stages or all in one sale,” Pegadaian president director Suwhono said, adding that the company would propose the plan at the end of Ramadan.
With the central bank setting its benchmark interest rate at 5.75 percent, the lowest level since it was introduced seven years ago, many companies are selling bonds to capitalize on low borrowing costs.
Total lending at Pegadaian is forecast to increase to Rp 110 trillion this year from last year’s Rp 80 trillion. Pegadaian benefits from rising demand over Ramadan. During the holy month, people pawn everything from necklaces to motorcycles to get extra cash to travel home for the Idul Fitri holiday.
Pegadaian’s net income rose 39 percent to Rp 929 billion in the first half compared to the same period a year earlier, the company reported in a prospectus published in Investor Daily on Monday. Its revenue rose 27 percent to Rp 3.8 trillion in the first half from Rp 3 trillion in the same period last year.
Suwhono said Pegadaian was evaluating investor appetite for its bond sale and monitoring developments in the bond market.
Indonesia’s economy is forecast by the government to expand by up to 6.7 percent next year, compared to this year’s forecast of 6.5 percent. Private consumption typically accounts for two-thirds of the country’s economy.
The yield of the government’s 10-year benchmark bonds fell slightly lower to 5.8288 percent on Monday from 5.8499 percent the previous trading day, while the yields of five-year government bonds rose slightly to 5.3087 percent from 5.298 percent, according to IBPA. Bond yields move inversely with prices.