KPC may borrow $385m in place of bond sale

KPC may borrow $385m in place of bond sale

Bloomberg Jakarta

PT Kaltim Prima Coal (KPC), Indonesia's biggest coal exporter, may borrow as much as US$385 million to pay debt, in place of a planned bond sale, said a company official.

The Jakarta-based company may pay 4 percentage points more than the London interbank offered rate, said Eddie Soebari, finance director of PT Bumi Resources, which bought KPC last year. Three-month Libor was last fixed at 1.72 percent. Credit Suisse First Boston, one of the banks hired to arrange the bond sale, will arrange the loan.

KPC put on hold a plan to sell $375 million of bonds because of fluctuations in Asian bond prices. It's becoming more expensive to sell debt after yields on Asian bonds rose on expectations the Federal Reserve will add to two interest rate increases since June 30.

"We are still looking at the market regarding whether bonds or loans will be cheaper for us," said Soebari in a telephone interview from Jakarta.

KPC proposed to borrow between $310 million and $385 million for two and a half years to refinance a previous loan that still has $325 million outstanding and to repay debt incurred by Bumi Resources to fund the purchase of KPC shares.

Credit Suisse will offer those joining the new loan by Aug. 24 an extra 25 basis points in fees on top of standard fees ranging from 50 to 200 basis points, the document said. A basis point is 0.01 percentage point.

Credit Suisse spokeswoman Elizabeth Rudall declined to comment. Credit Suisse and JPMorgan Chase & Co. were hired for the bond sale.

Standard & Poor's gives the company a rating of B+, four levels lower than investment grade and one notch higher than Indonesia's sovereign rating.

KPC had $28.3 million of net income in the first six months of the year, compared with a profit of $18.8 million in the same period a year earlier, the document said. Its earnings before interest, tax, depreciation and amortization rose to $95.8 million from $55 million.

It expects to produce 23.5 million metric tons of coal this year, up from 16.2 million tons last year, the document said. KPC's top three customers include Taiwan Power Co., Hong Kong's Castle Peak Power Co. and National Coal Supply Corp. In Israel.