Indosat may sell $250m of bonds for expansion
Indosat may sell $250m of bonds for expansion
Netty Ismail, Bloomberg/Singapore
PT Indosat, Indonesia's second-biggest phone company, plans to raise as much as S$250 million selling high-yield, dollar- denominated bonds to fund the expansion of its network.
The company plans to sell between S$200 million and S$250 million of seven-year bonds it can redeem in the fifth year, according to an e-mail sent to investors by one of the sale's arrangers.
The company will market the securities to investors in Hong Kong, Singapore, London and New York from June 13 until June 16, the e-mail said. Credit Suisse First Boston, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are managing the sale.
Indosat is taking advantage of a fall in borrowing costs during the past three weeks, as concern eased that General Motors Corp. and Ford Motor Co. would swamp the market for high-yield debt. Junk bonds are rated below BBB- by Standard & Poor's or below Baa3 at Moody's Investors Service.
The risk of default by Asian non-investment grade companies, as measured by the extra interest demanded by investors compared with U.S. Treasuries, fell to about 3.45 percentage points on June 7, from a year's high of 3.88 percentage points on May 18, according to a JPMorgan Chase & Co. index.
Investors demanded a yield of 6.96 percent to hold Indosat's 7.75 percent bonds maturing in November 2010 at 3:45 p.m. in Singapore, according to data provided by Deutsche Bank AG. The yield has narrowed from as high as 7.86 percent on April 19, the data show.
Indosat plans to spend as much as S$1 billion this year, compared with S$700 million last year, to expand its network, including its cellular business, and meet higher mobile-phone demand, Deputy President Director Ng Eng Hoe said on Feb. 2. The company plans to sell dollar bonds to raise money for expansion, Finance Director Wong Heang Tuck said on May 11.
The company competes with PT Telekomunikasi Indonesia, which owns PT Telekomunikasi Selular, the country's biggest cellular operator. Indosat, 42 percent-owned by Singapore Technologies Telemedia Pte, sold S$300 million of seven-year bonds in October 2003, its first overseas debt sale.
Indosat's foreign-currency debt rating was raised by one level to B1, four levels lower than investment grade, by Moody's Investors Service in April. The company's debt is rated one level higher at BB- by Standard & Poor's.
S&P and Fitch Ratings cut their ratings on GM debt to below investment-grade last month, pushing more than $50 billion of the automaker's $196 billion in debt into benchmark junk-bond indexes, effective June 1.