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.