Indofood may sell Rp 1.75t of bonds

Indofood may sell Rp 1.75t of bonds

PT Indofood Sukses Makmur, the world's biggest maker of instant noodles, may sell as much as Rp 1.75 trillion (US$192.6 million) of bonds to buy back dollar-denominated Eurobonds before they come due in 2007.

"We plan to refinance the debt with a combination of bonds, bank borrowings and internal cash," Djoko Wibowo, Indofood director and corporate secretary said in an interview in Jakarta. Indofood is seeking to raise the funds by the end of November, he said.

Jakarta-based Indofood and other Indonesian companies are selling bonds to expand and to repay debt. PT H.M. Sampoerna, Indonesia's second-biggest publicly traded cigarette maker, plans to sell Rp 1 trillion of securities this month to help repay debt maturing in 2005.

Indofood plans to buy back the Eurobonds sold in June 2002 by Indofood International Finance Ltd, its Mauritius-based unit, to avoid higher taxes starting January 2005, Wibowo said. The nominal value, or the amount of money the holder of the bond receives when the security matures, of the bonds is $310 million, he said. The company raised $280 million selling the same bonds in June 2002.

"If we do not make any redemption, than we have to pay more in rupiah due to the change in tax regulation," he said.

The Indonesian government plans to cancel a tax treaty with the Mauritius government and raise taxes on Mauritius-issued bonds to 20 percent starting in January. Under the existing tax treaty, Indonesia levies a 10 percent withholding tax on holders of bonds issued in the Indian Ocean offshore haven.

The company sold Rp 1 trillion of bonds in June with a coupon of 12.5 percent. Indofood's foreign currency debt is rated B2 by Moody's Investors Service and B by Standard & Poor's. Both are junk designations, or high-risk, high-yield. -- Bloomberg