Indosat may fail in its bond issue<\/p>\n
JAKARTA (JP): Publicly-listed state telecommunication company
\nPT Indosat may not be able to meet its target to raise about Rp
\n1.5 trillion (US$141.50 million) in cash from its recent bond
\noffering, company spokesperson S. Auliana said here on Tuesday.<\/p>\n
Auliana said that a weaker rupiah and the subsequent higher
\nbank deposit interest rates had discouraged investors from
\ninvesting their cash in bonds.<\/p>\n
\"Subscription for our bonds may be below the targeted Rp 1.5
\ntrillion,\" she told a press briefing.<\/p>\n
Another Indosat official said that, up until Wednesday,
\nsubscription for its bonds had reached about Rp 1 trillion.<\/p>\n
Indosat is offering bonds worth approximately Rp 1.5 trillion
\nto finance expansion plans. The bonds are issued in two series,
\nwith the A series carrying fixed interest rates of between 17.5
\npercent and 18.5 percent throughout their five year tenure.<\/p>\n
The B-series carry a combination of fixed and floating
\ninterest rates. The rate for the first year is fixed at between
\n17.5 percent to 18.5 percent, while for the remaining years the
\nrate is set at 2.5 percentage points above the average interest
\nrate of three-month time deposits at four local banks.<\/p>\n
The offer period for the bonds will be closed today.<\/p>\n
Auliana said that Indosat initially thought the bond market
\nheld potential, given its strong growth recently.<\/p>\n
But the rupiah's sharp descent has prompted Bank Indonesia to
\ntighten the money supply by raising interest rates on its
\ncertificates.<\/p>\n
In response, banks must offer higher interest rates to compete
\nwith Bank Indonesia certificates.<\/p>\n
Aside from competing against higher deposit rates, the bond
\nmarket is also losing its appeal because of the government's move
\nto tax bond transactions.<\/p>\n
Auliana said that, to cover the shortfall from the bond
\nproceeds, Indosat was considering taking loans, or divesting five
\npercent of its stake in the company.<\/p>\n
Indosat issued the bonds mainly to cover its expansion into
\nthe cellular market, for which it would allocate some 35 percent
\nof the proceeds.<\/p>\n
Twenty six percent of the proceeds would be spent on the
\ndevelopment of Indosat's domestic network, 23 percent on its
\ninternational direct dial services, 10 percent on its Internet
\nand multimedia services, and another 6 percent on its
\ninternational marine cable communications system.<\/p>\n
This year, Auliana said, Indosat planned to spend about Rp 12
\ntrillion on its expansion programs.<\/p>\n
\"This year we'll do most of the heavy investments. Next year
\nour investment will probably be between Rp 1 trillion and Rp 2
\ntrillion,\" she explained.<\/p>\n
The company had recently signed an agreement with fixed line
\noperator PT Telkom to end their cross-ownership in several
\nsubsidiaries.<\/p>\n
The $1.5 billion deal requires, among other things, both
\ncompanies to trade their shares in cellular operators PT
\nTelkomsel and PT Satelindo.<\/p>\n
Indosat would end up owning Telkom's stake in Satelindo, while
\nTelkom would take over Indosat's stake in Telkomsel.<\/p>\n
Given Telkomsel's high value, Telkom must pay Indosat another
\n$346 million, which Indosat would use to further boost its stake
\nin Satelindo.<\/p>\n
Next to Satelindo, Indosat would also launch its own cellular
\nservice, slated for August this year.<\/p>\n
Auliana said the company expected some 50,000 to 60,000
\ncustomers in the first year of operation.<\/p>\n
Separately, tea producer PT Sinar Sosro said it planned to
\nissue bonds worth Rp 200 billion in a public offering next month.<\/p>\n
Sosro's five-year bonds would come with fixed coupon yields of
\nbetween 18.5 percent to 19.5 percent, and floating coupon yields
\nof between 3.5 to 4 percentage points above the average six-month
\ndeposit rates of appointed local banks.<\/p>\n
The company plans to use most of the proceeds to finance the
\ncompletion of several of its factories and the repayment of
\ndebts. (bkm)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/indosat-may-fail-in-its-bond-issue-1447893297",
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