Semen Gresik to issue Rp 1.2 trillion in bonds

Semen Gresik to issue Rp 1.2 trillion in bonds

JAKARTA (JP): Publicly listed state cement producer PT Semen
Gresik said it would issue up to Rp 1.2 trillion (about US$125
million) in domestic bonds in the first semester of this year to
raise funds to repay its debts.

During the company's extraordinary shareholders meeting on
Friday, the plan to issue the domestic bonds was approved, as was
the replacement of one of the company's commissioners.

Semen Gresik president Urip Timuryono said his company planned
to use the funds from the bonds to repay part of its medium-term
notes I and II, which have a price of $162.21 million and Rp
214.6 billion, respectively.

Payment for note I falls due in January next year, while note
II will mature in April of the same year, he said.

"Semen Gresik is acting on prudential principles in this
refinancing scheme, and the company is confident it can meet its
obligations to creditors," Urip said during a media conference
following the shareholders meeting.

He said the coupon rates on the bonds had yet to be decided,
but added they would reflect the bonds' rating and market
conditions.

State rating agency PT Pefindo, he said, was in the process of
rating Semen Gresik's bonds.

"We prefer to have fixed rates instead of floating ones," Urip
added.

Assuming an exchange rate of Rp 9,500 to the U.S. dollar,
payment for notes I and II will total Rp 1.7 trillion, he said.

Because the bond issue will only raise Rp 1.2 trillion, he
said Semen Gresik would repay the remaining Rp 500 billion of the
notes from internal sources.

A press statement from the company said bonds were chosen as
the method to finance the notes because they were less costly
than other sources of financing, such as loans.

Semen Gresik issued medium-term notes I and II in 1997 to help
finance the construction of its Tuban II cement plant.

Initially, the company had its U.S. dollar-denominated note
hedged, but financing problems in 1998 made it unable to extend
the hedging.

Urip dismissed worries about repaying unhedged U.S. dollar-
denominated loans with the local currency.

"We have factored in the risk of currency fluctuations, which
is why we are assuming a 9,500 exchange rate to the dollar," he
said.

Asked whether the local market could absorb Rp 1.2 trillion
worth of bonds, he said underwriters had made a "full
commitment" to the bond issue, meaning the underwriters would buy
up all the bonds not taken by investors.

The underwriters include PT Danareksa Securities, PT Bahana
Securities and PT Citicorp Securities Indonesia.

Urip also gave assurances that the government's plan to spin
off Semen Gresik's subsidiaries PT Semen Padang and PT Semen
Tonasa would have no impact on the bonds issue.

The bonds concern only Semen Gresik and have nothing to do
with the consolidated operations of its subsidiaries, he said.

The government plans to spin off the two subsidiaries in
response to protests from the local communities near Semen Padang
in West Sumatra and Semen Tonasa in South Sulawesi.

Locals demanded the spin-off because of worries over the
foreign ownership in Semen Gresik.

The Semen Gresik Group, which includes Semen Padang and Semen
Tonasa, is 25 percent owned by the Mexican-based PT Cemex
Indonesia, which has long expressed its desire to increase its
stake in the company.

"It will make no difference whether the spin-off occurs or
not, we will go ahead anyway and issue the bonds," Urip said.

Cemex president Fransisco Noriega said no progress had been
made in the plan to spin off the companies since the government
unveiled the scheme last year, without revealing how it planned
to achieve the spin-off.

"We are still waiting for their proposal," he said.

The government owns a 51 percent stake in Semen Gresik, Cemex
has a 25.53 percent stake and the public owns the remaining 23.46
percent. (bkm)