Asia debt market: Excelcomindo bond looks more remote
Asia debt market: Excelcomindo bond looks more remote
Dow Jones Singapore
A new U.S. dollar bond this year from unlisted PT Excelcomindo now looks a little more remote after the Indonesian telecommunications firm once again altered the consent solicitation on its existing 2009 notes.
"Basically, it delays any incremental debt for six months," said a banker familiar with the company.
Excelcomindo is in the market for a bond of around US$400M and has mandated Commerce International Merchant Bankers Bhd., JPMorgan Chase & Co. and UBS AG as lead managers for the deal that it hoped to sell following its $300 million initial public offering expected next month.
Excelcomindo, Indonesia's third largest wireless operator after Telekomunikasi Selular and Indonesian Satellite Corp., needs to raise cash for much needed capital expenditure to keep up with its competitors.
As such, in early July, it asked holders of its $350 million 8.0 percent bonds to approve a change to the bond covenant to allow the firm to increase its debt to six times earnings before interest, tax, depreciation and amortization from late January, 2006.
When the firm failed in July to get the nod from the holders of the requisite 50.1 percent of 2009 bonds, it doubled the sweetener payment to $10 for every $1,000 of bonds held.
It then cut the debt limit it was seeking to 5.0 times from Jan. 27 and, in the latest move, said it would retain current limits until 27.3 percent shareholder Telekom Malaysia becomes a majority owner.
Malaysia Telekom -- Malaysia's largest telecommunications company and the country's second largest firm in terms of market capitalization -- is expected to boost its holding in Excelcomindo to 80 percent later this year and at that point,
Excelcomindo says it wants to be able to raise debt-to-Ebitda of 5.0 times until Jan. 27, 2007, 4.5 times for the following year and 4.0 times thereafter.
"This change is pretty material," noted the banker, but questioned whether the move was too little, too late to spur the nod from the block of six or seven investors who haven't yet consented to the change.
"A limited number of holders are able to stop that and are ostentatiously holding out for a higher price," he added.
Those holding out are reckoned to be U.S. hedge funds and a couple of proprietary trading desks at investment banks although a statement from Excelcomindo Friday said, without specifying, that the number of consents has risen since the Aug. 4 expiry of the last solicitation.
Another source familiar with the subject said at least one holder had requested payment of $70 per $1,000 of paper.
The desire to increase debt comes with Excelcomindo wanting to spend around $1 billion between 2005 and 2007 to expand its network.
"You can't have it in just equity. You need have different financing," said a person familiar with the firm. "It's going to be in a multitude of different kinds of indebtedness."
Whether it accesses the bond market or short-term credit lines in the first instance will depend on market conditions and U.S. interest rates, he added.