Adhi Karya issuing Rp3.5t bonds to fund LRT, as govt preparing investment guarantee

PT Adhi Karya Tbk (IDX: ADHI) targeting to raises new contracts Rp32.9 trillion (US$2.33 billion) in 2021, up 15 percent from this year' target - Photo: Special

JAKARTA (TheInsiderStories) – State-owned construction company PT Adhi Karya Tbk (IDX:ADHI) announced its plan on Wednesday to issue bonds worth Rp3.5 trillion to partly funds the light rapid transport (LRT) in the Greater Jakarta area (Jabotabek), as the government drafting ruling to provide political and investment guarantee.

The bonds will have tenor of five years, payable every three months starting from Sept 22, 2017 and last payment on June 22, 2022. The coupon rate of the bonds is yet to be set.

Adhi Karya sets book building date on May 24-June 8, followed by offering date on June 19 and listing on the Indonesian Stock exchange on June 23, 2017.

The company said as much as Rp800 billion of the bonds proceeds will be allocated to two subsidiaries of Adhi Karya, namely PT Adhi Persada Beton (APB) and PT Adhi Persada Gedung (APG), to fund the development of the LRT projects.

As much as Rp500 billion of the bonds proceeds will be used to refinance its matured bonds and the remaining funds will be used to strengthen working capital of Adhi Karya.

The bonds issue is part of the planned Rp5 trillion worth of bonds to be issued by Adhi Karya in the next few years.

Meanwhile, on Tuesday, government officials said the government is drafting regulation that provides political and investment guarantee of the LRT projects being developed in Jabotabek area. The financing support details of the LRT projects are being assessed by the government ministries.

Director General for Management, Financing and Risk of the Finance Ministry Robert Pakpapan told reporters on Tuesday after attending a coordinating meeting on LRT development that the government is preparing a President Decree related with the development of LRT in order to provide political and investment protection to the project.

He noted the Presidential Decree No 49, 2017 allows the finance ministry to provide guarantee to the operator and investor of the LRT project.

In addition, Director General for Railway of the Transportation Ministry Prasetyo Boeditjahjono said his office is still reviewing and calculating the project financing. He noted the Transportation Minister Budi Karya Sumadi has sent letter to the Finance Minister Sri Mulyani Indrawati to give task to PT Sarana Multi Infrastruktur (SMI) to study a possibility of providing funding support to the LRT project.

Separately, banks have called on the government to provide financing guarantee to the project in the form of convertible bonds to be issued by PT Kereta Api Indonesia (KAI) as the operator of the project, before providing loans to the LRT project.

In February this year, Adhi Karya has signed an agreement to develop an integrated LRT project covering Jakarta, Bogor, Depok and Bekasi. The agreement was signed by Director General for Railway of the Transportation Ministry and President Director of Adhi Karya.

The LRT project is projected to cost Rp23.39 trillion. The cost covers the first phase of the LRT project, namely Cawang-Cibubur section, Cawang-East Bekasi and Cawang-Dukuh Atas in the heart of Jakarta city. (*)