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.