The coal miner, PT Indika Energy Tbk (IDX: INDY) has completed the issuance of global bond with total amount of US$675 million in two stages - Photo by the Company

JAKARTA (TheInsiderStories) – The coal miner, PT Indika Energy Tbk (IDX: INDY) has completed the issuance of global bond with total amount of US$675 million in two stages. On Oct. 28, the issuer has released $225 million of bond with an interest rate of 8.25 per per year through its unit, Singapore-based Indika Energy Capital IV Pte. Ltd.

Earlier in Oct. 22, the company issued $450 million with the same interes and maturity. These bonds will mature in 2025. The spokesman, Adi Pramono, said in an official statement yesterday, that the proceeds from the bond issuances will be used to refinance its $500 million of debt issued by other subsidiary, Indo Energy Finance II B.V.

The debt securities with interest of 6.37 percent will mature in 2023. In addition, Indika also plans to diversify its business outside the coal mining business.

The issuer’ units acted as guarantor of the global bond issuance like Tripatra (Singapore) Pte. Ltd., PT Indika Inti Corporindo, PT Tripatra Engineering, PT Tripatra Multi Energi, and PT Tripatra Engineers and Constructors. The miner has appointed Standard Chartered Bank (Singapore) Ltd., Mandiri Securities Pte Ltd., and Singapore branch of Deutsche Bank AG as joint book-runners and initial buyers of debt securities.

Indika also reported, the transaction values exceeds 50 percent of the company’ equity and has received the shareholder approval on Oct. 26, 2020. The bonds has rating Ba3 from Moody’s Investors Service. The agency also give same rating to the US$285 million backed senior secured notes due 2023 issued by Indo Energy Finance.

Then, to $265 million backed senior secured notes due 2022 and the $575 million backed senior secured notes due 2024 issued by Indika Energy Capital. At the same time, Moody’s has assigned a first-time Ba3 rating to the backed senior secured notes to be issued by Indika Energy Capital.

The proceeds from the notes will be primarily used to refinance existing debt of the company. The notes are unconditionally and irrevocably guaranteed by Indika and will rank pari passu with its outstanding US Dollar notes. The outlook remains negative.

It said, the proceeds from Indika‘ proposed US dollar notes issuance, which form part of its $650 million debt raising plans announced in September, will be used primarily to refinance the majority of its US Dollar notes coming due in 2022 – 2023. Part of the proceeds will also be used to invest in non-coal related businesses.

Upon completion of its planned refinancing, which Moody’s views as credit positive, Indika will not have any material debt maturities until 2024. As a result, the miner’ strong liquidity and minimal near-term refinancing risk afford it time to improve its weak credit metrics amid challenging business conditions, including low thermal coal prices.

Based on its medium-term price assumptions for Newcastle thermal coal of $65 per ton, Moody’s estimates Indika‘ adjusted leverage — as measured by adjusted debt/EBITDA – will remain elevated at around 4.3x as of Dec. 31, 2021, up from 3.5x in December 2019, and slightly above the downgrade trigger of 4.0x.

However, in light of slowing economic growth, the downside risk to the issuer’ credit metrics worsening beyond Moody’s current expectations is elevated, particularly if coal prices remain low for a prolonged period. In order to support earnings, the company has taken steps to reduce operating cash costs at its 91 percent-owned coal mining subsidiary, PT Kideco Jaya Agung, to $32.3 per ton in 1H 2020 from $35.6 per ton in 1H 2019.

Indika’ contract mining subsidiary PT Petrosea Tbk (IDX: PTRO) and engineering subsidiary PT Tripatra Multi Energi, are also seeking new contracts to boost their contract order books which have been declining in recent years, although near-term contract wins could be challenging given the weak macroeconomic environment.

The agency expects Indika will maintain its good liquidity, as its large consolidated cash balance and projected operating cash flows will be sufficient to meet its cash needs over the next 12-18 months. They also expects its’ planned investments, as part of its strategy to diversify earnings away from thermal coal, will not materially weaken its liquidity. The rater hope the miner to obtain additional covenant relaxations or waivers on its two bank loan facilities.

Indika is an Indonesian integrated energy group listed on Indonesia’ Stock Exchange, with a market capitalization of around Rp4.8 trillion ($326.53 million) as of Oct. 9. Its principal investment, Kideco, one of Indonesia’ largest domestic coal producers.

Written by Editorial Staff, Email: theinsiderstories@gmail.com