Indosat raises bond 10% to Rp 1.1t

Indosat raises bond 10% to Rp 1.1t

Shanthy Nambiar, Bloomberg/Jakarta

PT Indosat, Indonesia's second-largest telecommunications
company, is increasing a sale of bonds by 10 percent to Rp 1.1
trillion (US$114.9 million) to fund the expansion of its network,
the arranger said today.

The bonds, the first debt sale by the company since October
2003, will mature in 2011 and offer investors a coupon of 12
percent, Hakiki Sudrajat, assistant vice president of investment
banking at sale arranger PT Andalan Artha Advisindo, said in an
interview in Jakarta.

Of the total, Rp 285 billion will be raised through a sale of
Islamic bonds that adhere to the Koran's ban on payment of
interest, said Sudrajat.

Indosat, 42 percent owned by Singapore Technologies Telemedia
Pte., plans to spend $900 million this year to expand its
network, including its cellular infrastructure. The company
competes with PT Telekomunikasi Indonesia, which owns PT
Telekomunikasi Selular, the country's biggest cellular operator.

The proposed debt offering will be Indosat's second sale of
Islamic debt after the company sold Rp 175 billion in October
2002, paying investors returns averaging 16.75 percent. In
October 2003, the company sold $300 million of seven-year bonds.

Indosat's latest Islamic bonds will be the so-called "Ijarah"
type, Sudrajat said. The bonds will be backed by assets sold to a
company created by the borrower to issue the securities. The
borrower then rents back the assets. The rental goes back to
investors in place of interest. At maturity, the bond seller buys
back the assets at an agreed price and investors are repaid the
principal.

Standard & Poor's rates Indosat's long-term local currency
credit BB, two levels below investment grade. Moody's Investors
Service assigned the company a Ba2 rating, also two levels below.
Both are junk, or high-yield and high-risk, ratings.