Indofood to issue US$200m bond to refinance debt
Indofood to issue US$200m bond to refinance debt
The Jakarta Post, Jakarta
Food products manufacturer PT Indofood Sukses Makmur plans to issue $200 million in U.S. dollar-denominated bonds and has appointed Credit Suisse First Boston Corp. to underwrite the issue, a spokesman for the bank said Tuesday.
CSFB is a unit of Credit Suisse Group.
Indofood, the world's largest instant noodle manufacturer, has said it is planning to raise the money to partly refinance $250 million in debt that will be due in June.
The CSFB spokesman was quoted by Dow Jones Newswires as saying that the timing and pricing of the issue hadn't been decided.
Investors said they expect the international roadshow for the bonds to kick off at the end of this week, with pricing in mid- June.
The company repaid around $200 million in loans last year, but its outstanding debt remains a high $346 million plus another Rp 2.2 trillion (US$248.5 million). Indofood's debt-to-equity ratio stood at 2.3 times as of the end of last year.
A number of Indonesian companies are planning to tap the international bond market following PT Telekomunikasi Selular Indonesia's successful $150 million issue last month.
Telkomsel's issue showed that foreign investors are now willing to nibble at dollar debt issued by Indonesian companies. This is partly a reaction to the country's more stable political and economic situation under President Megawati Sukarnoputri. It's also because such bonds offer high yields.
Meanwhile, rating firm Standard & Poor's assigned Tuesday its single-'B' corporate credit rating to Indofood.
The outlook is stable, S&P said in a statement.
At the same time, Standard & Poor's assigned its single-'B' rating to the proposed US$200 million senior unsecured notes, issued by 100 percent subsidiary Indofood International Finance Ltd., and guaranteed by Indofood and its subsidiaries PT Bogasari Sentra Flour Mills, PT Indobahtera Era Sejahtera, PT Inti Abadi Kemasindo, and PT Intisari Flour Mills.
The risks to Indofood's rating were those associated with operating in Indonesia; increasing competition; possible depreciation of the local currency; aggressive financial profile; and ownership by an aggressive overseas conglomerate, S&P said.
Offsetting these risks are Indofood's strong internal business position: its dominance of the local market and the resulting economies of scale from running a large operation; the diversity of its product portfolio, and its well-established distribution network in a dispersed island country.
"The outlook reflects Standard & Poor's expectation that proceeds from Indofood's upcoming bond sale and from existing credit facilities will alleviate the company's near-term refinancing risk.
"Furthermore, Indofood should be able to maintain its leading market position given its low-cost operations, strong branding, and extensive distribution network," said Erly Witoyo, credit analyst at Standard & Poor's.