Japan Bank for International Cooperation (JBIC) has provided a guarantee for the rupiah-denominated bonds issued by PT Summit Oto Finance (SOF), an Indonesian corporation in which Sumitomo Corporation has equity stakes.


The corporate bonds totalling Rp1tn (¥13bn) issued by SOF is guaranteed by Sumitomo Mitsui Banking Corporation (SMBC), with a secondary guarantee by JBIC. The proceeds of the bond issue will be used for SOF’s consumer financing, to finance the purchase of Japanese motorcycles. This is the second bond issued by SOF in the Indonesian capital market, following the first one that SOF issued by making use of JBIC’s guarantee facility in March 2006.


SOF’s business operations have been rapidly expanding in parallel with the recent robust growth of the motorcycle sales market in Indonesia. As part of efforts to diversify its finance instruments, SOF vigorously addresses the rupiah-denominated bond issuance.


In many Asian countries, however, underdeveloped bond markets have often made it difficult for Japanese affiliates to raise funds with bond issuance, and Indonesia is no exception. To facilitate their bond issuance, JBIC, in its capacity as an official financial institution, is called on to provide credit enhancement. It is against this background that JBIC decided to utilize its guarantee facility in support of SOF’s successful and continued bond issue in the local market.


JBIC has been active in promoting the Asian Bond Market Initiative (ABMI) which was proposed by the government of Japan in December 2002 and under which various efforts to develop bond markets have been underway within the framework of ASEAN+3 (Japan, China and Korea).


As the second such effort in Indonesia under the ABMI, following the first one last year, this guarantee will help develop the country’s bond market, and contribute to developing a favourable environment for Japanese companies’ overseas business development.