PT Andalan Artha Advisindo (AAA) Sekuritas as lead underwriter in PT Indosat's bond issue worth Rp 1T has allocated Rp 500B as part of risk management.

AAA Chief Executive Officer Zamzam Reza told Kompas daily that the fund comprises Rp 100B to Rp 120B from internal cash, Rp 100B to Rp 150B from loans, and Rp 300B from standby buyers.

"If the bonds are not sold out, at least we can still raise Rp 500B in cash" said Zamzam in response to doubts from many over the company's ability to promote the bonds.

Zamzam said that Indosat appoints AAA as lead underwriter probably because of the good relationship between both parties. AAA was the lead underwriter of Indosat I bond issue worth Rp 1T in April 2001 and also arranged a syndicated loan of Rp 1.5T for IM3.

Many brokerage companies criticize the lack of transparency in the appointment of AAA as lead underwriter by Indosat in its bond issue. Indosat also invited other brokerage firms in the lead underwriting tender, but it one-sidedly appointed AAA as lead underwriter without giving an opportunity to other participants. AAA in the tender proposed a commission of 1.5%, lower than the average commission of 1.85%.

AAA is confident that Indosat's bonds will be oversubscribed due to the bullish market, SBI interest rate downtrend, and good rating of the bonds (AA+). Moreover, investors currently prefer bonds issued by state firms and the government will lift its guarantee scheme for banks next January. The government's plan to sell its shares in Indosat is also expected to raise investor interest in the company's planned bond issue.
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