Polysindo secured notes priced at 9.37 percent

JAKARTA (JP): Indonesia's largest polyester producer, PT Polysindo Eka Perkasa, has announced the pricing of its guaranteed secured notes at a coupon of 9.37 percent.

The spread of the US$250 million notes, rated Ba2/BB+, to the U.S. treasuries is 325 basis points, the tightest pricing for an Indonesian corporate in the noninvestment grade.

The company said in a statement yesterday that the value of the transaction increased in size to $250 million from $200 million to meet the robust investors demand.

Steven Simpson of Polysindo said that the success of the deal reflected Polysindo's strong credit fundamentals and leading market position in the polyester industry.

"We have worked closely with international capital markets and delivered on our promises to bondholders, and that has resulted in a much lower cost of funding for our company," he said.

The company said that Polysindo had reduced its borrowing cost in the debt capital markets from an initial 13 percent coupon in 1994 to the 9.37 percent achieved in the latest transaction.

It said proceeds from the issuance would be used to finance the company's recently announced five-year $800 million expansion program and for other financing purposes.

"The expansion program is based on the company's strategy of vertical integration, increasing upstream capacities in purified terepthalic acid and polymer to support downstream production of yarns, fibers and fabrics," it said.

The company will also include significant capacity expansion in filament yarn and the addition of higher-margin product lines, such as polyester fleece fabric and coated active-wear fabrics.

Elizabeth Chandra, executive director of Morgan Stanley & Co., said that the transaction was a tremendous success.

"It was priced through the level of the company's existing debt and increased in size despite uncertainty in the Asian currency market," she said.

The notes, to be matured on July 20, 2007, were issued by Polysindo Finance Company B.V, a financial arm of PT Polysindo based in the Netherlands Antilles.

The company said that the notes would be callable in five year at par plus half the coupon, declining to par in year seven.

The transaction was lead-managed by Morgan Stanley & Co., with Merrill Lynch and Bankers Trusts as comanagers.

PT Polysindo Eka Perkasa, a subsidiary of Texmaco Group, is listed on the Jakarta and Surabaya Stock Exchanges. (aly)