Indofood plans bond issue to refinance debt

Indofood plans bond issue to refinance debt

Edhi Pranasidhi, Dow Jones, Jakarta

PT Indofood Sukses Makmur, the world's largest instant noodle
maker, said Tuesday that it's exploring the possibility of
issuing bonds to refinance higher interest rate bank loans and
for investment.

"We are exploring an idea of issuing bonds," Indofood Chief
Executive Eva Riyanti Hutapea told Dow Jones Newswires. She gave
no further details, but the market expects the Indonesian
company, part of the huge Salim Group, to issue around Rp 1
trillion (US$112 million) in local bonds.

Falling interest rates locally means it's a good time to
refinance some of its bank loans, Eva said. Currently Indofood
has long-term foreign debt of $480 million and Rp 3 trillion in
rupiah loans.

Interest rates on the central bank's benchmark one-month note
have fallen to around 13 percent recently from a peak of almost
18 percent in 2001.

Last year, the company issued $280 million in foreign bonds to
help refinance debt. That was the largest offshore bond issue
since the 1997-98 Asian financial crisis.

Indofood also wants fresh funds to finance investment plans
for 2003, Eva said. The company is looking at buying palm oil
plantations but hasn't yet made any firm decisions, she added.

"This year we are going to make investments," she said. "I'm
always keen on palm-oil plantation companies."

The company has said in the past it wanted to buy palm-oil
company PT Astra Agro Lestari. Apart from instant noodles,
Indofood also has a large cooking and edible oil business.

But the Indonesian Bank Restructuring Agency, or IBRA, blocked
Indofood from making any acquisitions until the Salim Group had
repaid its debts to the state.

Indonesia's Salim family, which holds a direct 48 percent
stake in Indofood through its Hong Kong-listed First Pacific Co.
Ltd., owes the government Rp 58 trillion stemming from the
collapse of its bank during the Asian crisis.

Salim handed more than a hundred companies to IBRA to help
repay the debt but kept control of the crown jewel, Indofood. The
government said recently it was considering to write off Salim's
obligations, even though the value of companies it handed to IBRA
has fallen short of its debts.

Falling consumer demand, due to slumping investment and rising
unemployment, is a risk for Indofood's financial performance in
the year ahead, Eva said.

But the company hopes to boost its sales volume by targeting
middle-income consumers. Traditionally, Indofood makes most of
its sales to lower-income consumers that account for the majority
of instant noodle purchases. Sales volume could grow by 10
percent this year over 2002 in an optimistic scenario, Eva said.

Indofood made a net profit of Rp 651.9 billion in the first
nine months of 2002, up 16 percent from the same period of the
previous year. Sales grew 11 percent to Rp 11.9 trillion in the
period. Full-year earnings figures for 2002 are due late next
month.