Arutmin sets fixed-coupon for $300m bonds issue

Arutmin sets fixed-coupon for $300m bonds issue

Dow Jones, Jakarta

Indonesia's third-largest coal miner PT Arutmin has set an indicative fixed-coupon rate of between 9.25 percent and 9.50 percent per year on its US$300 million five-year bonds.

The company will sell the bonds in the domestic market at 100 percent of face value. The funds raised will mainly be used to refinance the company's higher interest debts.

Akhabani, president of PT Trimegah Securities, a joint lead underwriter for the issue, said he was optimistic the bond would be well absorbed by the market due to the attractive yield.

"I think this is a very attractive offering for investors to consider," Akhabani said in a marketing presentation for prospective investors in Jakarta.

Arutmin will pledge collateral worth 150 percent of the bonds total face value as a guarantee to investors. The collateral will include long-term and spot sales contracts, insurance claims and account receivables, the company said.

Local rating agency Pefindo has rated the bonds BBB+ with a stable outlook.

But not all investors will be rushing out to buy the bonds despite the relatively high yield Arutmin is offering.

One concern is Arutmin's links to the debt-ridden Bakrie Group. Publicly-listed mining company PT Bumi Resources, which is part of the Bakrie group, owns an 80 percent stake in Arutmin that it purchased from BHP Billiton in 2001.

"We still remember well that many of the papers issued by Bakrie companies went sour following the 1997-98 financial crisis," said a director with a local insurance company, who declined to be named.

Arutmin produced 10.6 million metric tons of coal last year, and that is expected to rise to 15.8 tons this year. It has a 30- year contract to mine coal in South Kalimantan until 2019.