Indah Kiat plans Rp 1.5t bond issue to repay debt

JAKARTA (JP): Publicly listed PT Indah Kiat Pulp & Paper will soon issue bonds worth up to Rp 1.5 trillion (about US$200 million) to repay part of its debts.

PT Bahana Securities, the lead underwriter for Indah Kiat's bond issuance, said on Thursday that the five and seven year bonds would be offered to the public between Sept. 28 and Sept. 30 in the denominations of Rp 100 million, Rp 500 million and Rp 1 billion.

The bonds, which would be listed on the Surabaya Stock Exchange on Oct. 14, would carry fixed and floating interest rates, according to Bahana Securities president Witjaksono Abadiman.

The fixed rate for the first two years of issuance would be about 16 percent to 18 percent, he said assuring that such rates were competitive at present as the bank deposit rates stood at only about 13 percent.

"The fixed rate bonds only last up to two years, then there should be an interest rate review which is based on the changing market rates," he said admitting that the fixed rates cannot go beyond two years as the current interest rates fluctuate too much.

He said that the floating rate will be based on the Jakarta Interbank Offered Rate (JIBOR) and the average rates of the six month bank deposit at major local banks.

The six-month bank deposit interest rate is currently about 14 percent.

He said that 100 percent of proceeds from the bonds would be used to refinance the company's outstanding loans.

The company, with total assets of US$5.8 billion as of March, had total debts of $3 billion in the same period.

Witjaksono said he was confident that Indah Kiat bonds would sell well as currently institutional investors, such as pension funds and commercial banks, were trying to find alternative investment instrument to invest their money.

"Banks don't really start giving credits now, while pension funds want higher yields than the current bank deposit rates," he said.

Based on his market survey, he admitted, investors in the market now were seeing that the fair yield rates for their investment should be at between 16 percent to 18 percent.

He added that Indah Kiat, rated single A minus by the local rating agency Pefindo, was a healthy company with strong customer base as 80 percent of its production output was for export.

Indah Kiat, which produces 2.8 million tons of paper and 1.6 million of pulp, booked a net profit of $325.1 million for 1998, as compared to $274.6 million the previous year.

The company's revenue in 1998 stood at $1.16 billion, against $969.9 million the previous year.

The company was founded in 1976 by Eka Tjipta Widjaja family, which also controls the Sinar Mas Group, the country's second- largest diversified conglomerate, which is listed on the Jakarta and Surabaya Stock exchanges. (udi)