Excelcomindo bond looks more remote
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.