Adaro hires JPMorgan, banks to sell $600m of bonds, loans

Adaro hires JPMorgan, banks to sell $600m of bonds, loans

Denise Kee, Bloomberg/Singapore

PT Adaro Indonesia, the country's largest coal producer, is trying to cut borrowing costs by selling bonds and taking new loans to repay a S$600 million deal signed three months ago, said two bankers involved in the financing.

JPMorgan Chase & Co. and Goldman Sachs Group Inc. will underwrite a bond sale to raise as much S$350 million for Adaro, the bankers said. The company also hired JPMorgan, DBS Group Holdings Ltd. and Sumitomo Mitsui Banking Corp to arrange a S$250 million four-year term loan, said the bankers, who are involved in providing the loan and declined to be identified.

The refinancing means Standard Chartered Bank and 12 other lenders will cease earning interest on the five-year loan they arranged in August. The loan helped a group of buyout firms and investors pay most of the costs of their acquisition of Adaro.

Adaro runs a coal mine in Kalimantan, the Indonesian part of Borneo island, and has almost 2 billion metric tons of coal reserves.

Indonesian coal mining companies including Adaro and PT Bumi Resources plan to boost production by 9.7 percent next year after buyers in Japan, Taiwan, India and South Korea said they expect to increase demand by at least 5 percent, Jeffrey Mulyono, chairman of the Indonesian Coal Mining Association said Aug. 1.

The group of investors includes GIC Special Investments, Singapore's investment agency which manages the country's long- term foreign reserves; private equity units of Citigroup Inc. and Goldman Sachs Group Inc.; and Indonesian investors including Edwin Soeryadjaya, son of the founder of Indonesia's largest carmaker PT Astra International.

Indonesia was the fourth-largest coal producer in the Asia Pacific region after China, Australia and India in 2003, according to BP Plc's Statistical Review of World Energy. Most of Indonesia's output is thermal coal, used to generate electricity.