Inside Indonesia's Basel III-compliant tier two bond

Author: Karry Lai | Published: 18 Mar 2020

Bank Tabungan Negara (BTN) has issued a Basel III-compliant tier two bond worth $300 million. A first for Indonesia. Lawyers involved in the deal said that it sets a precedent for other banks looking to tap Basel III compliant securities from the international markets.

The securities are due 2025 at 4.2% and are listed on the Singapore Stock Exchange. The Ba3 rated bonds had strong investor demand and were 12.3 times oversubscribed.

Linklaters counsel Phill Hall, who advised the joint lead managers, said the main challenge was ensuring that the expectations of regional regulatory capital investors matched up with the requirements under Indonesia’s financial services authority Otoritas Jasa Keuangan (OJK). Bank Indonesia guidelines were also necessary to ensure that BTN received approvals for the issuance.

Aloysius Tan,...