State-controlled fertilizer company Pupuk Indonesia is seeking to raise Rp 3.6 trillion — equal to $270 million — from a bond sale in July. (Antara Photo/Pradana Aditya Putra)

Pupuk Indonesia Seeks to Raise Rp 3.6t From Bond Sale in July

BY :SARAH YUNIARNI

JUNE 12, 2017

Jakarta. State-controlled fertilizer company Pupuk Indonesia is seeking to raise Rp 3.6 trillion — equal to $270 million — from a bond sale in July intended to restructure its maturing bonds and inject fund to its subsidiary.

The bond sale will be the first in a series to raise a total of Rp 10 trillion in the next few years.

The company will offer a three-year Series A bond with an indicative annual coupon rate of around 7.75 percent to 8.5 percent. It will also offer a seven-year Series B bond with annual coupon rate of around 8.25 percent to 8.85 percent.

Fitch Ratings Indonesia, a local unit of global credit assessor Fitch Ratings, has confirmed the company's AAA rating, which indicates the company has the lowest default risk compared to its domestic peers.

Pupuk Indonesia appointed Bahana Securities, BCA Sekuritas, BNI Sekuritas, Danareksa and Mandiri Sekuritas as the underwriters for the bond sale.

The fertilizer company scheduled a book building period for the bond sale on June 12-20 and an offering period on July 4-7, before a listing on the Indonesia Stock Exchange (IDX) on July 13.

Pupuk Indonesia is the holding company of ten subsidiaries: Pupuk Iskandar Muda, Pupuk Sriwidjaja, Pupuk Kujang, Pupuk Kalimantan Timur, Petrokimia Gresik, Rekayasa Industri, Pupuk Indonesia Pangan, Mega Eltra, Pupuk Indonesia Logistik and Pupuk Indonesia Energi.

The company seeks to funnel 84 percent of the proceeds from the bond sale — equivalent to around Rp 3 trillion — into Pupuk Sriwidjaja (Pusri) Palembang.

Pusri Palembang will use most of the money to pay back creditors. The remainder will be used to redeem Pupuk Indonesia bonds worth Rp 568 billion issued in 2014 that will mature in July this year. The bonds carry a 9.63 percent coupon rate.

The company plans to set aside up to Rp 7 trillion in capital expenditure this year, 28.5 percent lower than last year's capex.

"We will use internal cash to fund 70 percent of the capex and the rest will be financed with bank loans," Pupuk Indonesia president director Aan Asikin Idat told reporters on Monday (12/06).

In 2016, a big chunk of the company's capital expenditure was spent on revitalizing the Pusri 2B plant in Palembang, South Sumatra, through Pupuk Sriwijaya. Construction on the Rp 7.4 trillion plant started in 2012 and it is expected to start operating this year.

Aan said the company's capex this year will also be used to revitalize an ammonia and fertilizer plant owned by Petrokimia Gresik in Gresik, East Java.

The plant, called Amorea II, has entered the final stage of construction and will start production by the end of this year.

Pupuk Indonesia is targeting production to reach 11.7 million tons this year, a slight increase of 4.4 percent from last year's total production of 11.2 million tons.

The company booked Rp 3.52 trillion in net income last year, up 3.8 percent from Rp 3.39 trillion in 2015.

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