Indosat in bond issue to refinance unit's debts<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
Telecommunication company PT Indonesian Satellite Corp.
\n(Indosat) is offering bonds worth Rp 1.75 trillion (US$208
\nmillion) to settle the debts of its cellular unit PT Satellite
\nPalapa Indonesia (Satelindo).<\/p>\n
Indosat finance director Nicholas Tan Kok Peng said in a
\npublic expose on Thursday that all of the proceeds from the bond
\nissue would be used to refinance Satelindo's debts, totaling $360
\nmillion in short-term bonds and bank loans.<\/p>\n
He explained that the issue would, in effect, extend
\nSatelindo's debt tenor and reduce its exposure to foreign
\ncurrency fluctuations.<\/p>\n
The issue will also help reduce Indosat's annual interest
\nburden on a portion of debts, from around 19.5 percent a year to
\nbetween 12 percent and 13 percent.<\/p>\n
Indosat's overall debt, including those owned by Satelindo,
\ncurrently amounts to around $900 million.<\/p>\n
Indosat, the country's second largest telecommunications firm,
\nsaid that its bonds would consist of two tranches, with the first
\ncarrying a fixed coupon rate of 12.25 percent to 12.75 percent,
\nwhich will mature in five years, but is callable in four years.<\/p>\n
The second tranche carries a fixed coupon rate of 12.50
\npercent to 13.00 percent with a maturing period of seven years,
\nbut is callable at the end of year four or six.<\/p>\n
Acting as underwriters are PT AAA Sekuritas and PT ING
\nSecurities Indonesia.<\/p>\n
The bonds have received an AA+ rating from local rating
\nagencies PT Pefindo and PT Kasnic Credit Rating Indonesia.<\/p>\n
The bookbuilding of the bonds is slated for Sept. 18 to Oct.
\n3, the offering period for Oct. 14 to Oct. 16, and the bonds are
\nto be listed on Oct. 22 on the Surabaya Stock Exchange.<\/p>\n
Indosat plans to integrate Satelindo with IM3 to become a
\ndivision of the firm, rather than a subsidiary.<\/p>\n
The company hopes that by vertically merging its cellular
\nphone units, it will be able to consolidate the companies' debts,
\nmaking it easier for Indosat to refinance the debts and invest
\nmore to develop its cellular business.<\/p>\n
Currently, the debt burden has hampered Satelindo's investment
\nprogram, as under its agreement with existing creditors, the
\ncompany is restricted to a maximum yearly capital expenditure of
\n$50 million.<\/p>\n
The restriction has impeded Satelindo's efforts to catch up
\nwith its arch rival PT Telekomunikasi Selular Indonesia, the
\ncellular unit of Indonesia's largest telecommunication company,
\nPT Telekomunikasi Indonesia, or Telkom.<\/p>\n
The cellular business contributed 57.5 percent to Indosat's
\nrevenue at Rp 3.883 trillion in the first half of the year.<\/p>",
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