Modernland cancels plan to issue warrants

JAKARTA (JP): The publicly listed Modernland Realty has canceled its plan to issue warrants, initially designed as sweetener for its mandatory convertible bonds.

Michael V. Aribowo, a commissioner of the company, said yesterday that the decision not to issue the warrants was made following the appeal from the chairman of the Capital Market Supervisory Agency (Bapepam).

"We have to listen to Bapepam," he told reporters following the extra-ordinary meeting of the company's shareholders.

The meeting approved the company's proposal to issue mandatory convertible bonds (MCBs) worth around Rp 179.52 billion (US$83.5 million) and the appointment of Jahja Iskandar as a director of the company, replacing Jusak Hartono.

Modernland initially planned to issue detachable warrants as a sweetener for its MCBs but the Bapepam opposed the plan, saying that pairing convertible bonds with detachable bonds could confuse the investing public.

According to the initial scenario, all existing shareholders would be entitled to subscribe at par four MCBs with a warrant for each existing share held. The warrants to be the first of such instrument on the local exchanges, could also be converted into new shares at the end of the maturity period.

Michael said that MCBs, approved during the meeting yesterday, will carry a half-yearly coupon of eight percent per annum, with a conversion in or before eight years. The MCBs would be offered to existing shareholders on a preemptive basis.

"All existing shareholders are entitled to buy MCBs worth Rp 2,400 (US$1.1) for each old share held. The bonds could be converted any time during the eight-year maturity period," he said.

Michael said that around 80 percent of proceeds from the bond issue would be used to finance land acquisition, development of residential projects and the remaining 20 percent for refinancing of existing debts.

Modernland, a member of the widely diversified Modern Group, is currently developing a 470-hectare real estate project in Cipondoh, Tangerang, with an 18-hole golf course.(hen)