PGN to cut size of bond sale

The Jakarta Post, Jakarta

Publicly-listed state gas distribution company PT Perusahaan Gas Negara (PGN) has cut the size of a proposed bond sale from an initial target of US$350 million to between $200 million and $225 million due to a bearish market.

PGN announced in February plans to issue $350 million of ten- year bonds by October to raise funds for expansion.

"We will review the market and decide in the next six months whether to issue the bonds and whether the bonds will be in euro or yen. It should bring maximum return to the company," PGN's president WMP Simandjuntak told reporters after an extraordinary shareholders meeting on Wednesday.

Simandjuntak said the company was not in a hurry to sell bonds given the current bearish mood in the bond market following hints from the U.S. Federal Reserves that it would raise interest rates in the near future to curb inflation.

High interest rates would increase the bond's yield and in turn would increase borrowing costs for firms.

"We will see if the market is improving, we will select one (type of bond)," Simandjuntak said.

In February, PGN sold $125 million in bonds, lower than the initial target of $150 million. The 10-year bonds were priced to yield 7.79 percent.

In the shareholders meeting, the company decided to give a total dividend for 2003 of Rp 259.726 billion or Rp 60.1 per share. The dividend represents 50 percent of net profit in 2003 at Rp 519.45 billion.