JAKARTA (TheInsiderStories) – Steel-maker, PT Krakatau Steel Tbk (IDX: KRAS) to releases a mandatory convertible bond (MCB) up to Rp2.2 trillion (US$156.03 million) absorb by PT Sarana Multi Infrastruktur (SMI). The notes have a tenure seven years and will be converted into shares in 2027 .
In total, said the finance director, Tardi, the company will get capital injection from the government worth of Rp3 trillion. The remaining Rp800 billion will be releases at the end of 2021. He added, after the issuances, the share owned by the public will be diluting from 20 percent to a around 14 to 16 percent.
“(After the issuances of MCB) will be followed up by (rights issue program) to maintained the public ownerships stay at 20 percent,” he told the media today (12/29).
The issuance, said Tardi is part of the government to injects capital to Krakatau Steel in the context of National Economic Recovery program, which was agreed on Oct. 6. The funding, he continued, will be use to support the upstream projects and to refinances part of the company’ debt.
Since last year, the manufacturer plans to finalize the debt restructuring amounting to $2.2 billion. According to the CEO, Silmy Karim,the issuer still has debt with four banks such as PT Bank CIMB Niaga Tbk (IDX: BNGA), Standard Chartered Indonesia, PT OCBC NISP Tbk (IDX: NISP) and PT Bank DBS Indonesia, which reached 22 percent of its total debt.
So far, the manufacturer and its units has signed the agreement of restructuring with six financial institutions consists of PT Bank Mandiri Tbk (IDX: BMRI), PT Bank Negara Indonesia Tbk (IDX: BBNI), PT Bank Rakyat Indonesia Tbk (IDX: BBRI), PT Bank ICBC Indonesia, Lembaga Pembiayaan Ekspor Indonesia (Indonesia Eximbank), dan PT Bank Central Asia Tbk (IDX: BBCA).
In the agreement, the producer has get a payment relaxation with lower costs but should pay the debt in three schemes. Tranche A with the operational fund, tranche B with divestment fund, and tranche C1 with the rights issue proceed.
After the restructuring completed, Krakatau Steel rescheduled the payment date to the next 10 years, starting in 2019. The company will do several initiatives and sell non-productive assets to pay the debt, said Karim.
While, the company also pursue its performance by optimizing the production to 3.5 million ton. Karim is optimistic to achieve this target by looking at the October result that sold 200,000 tons HRC. He asserted the production could be supported by reducing steel imports which estimated to grab EBITDA of $250 million.
Therefore, Karim is approaching several ministries to decrease steel imports, so it is able to support the domestic steel industry. In addition, the issuer has realized the cooperation with PT Lotte Chemical Titan Tbk (IDX: FPNI) to build the petrochemical plant on 60 hectares of its land.
The project has been stalled for around three years, due to land conflict. By the official cooperation, the South Korea company will invest $820 million to the project next year. While the total investment will reach $4.2 billion.
The company also has conducted its first production of hot-rolled coil (HRC) steel from the results of its newest steel smelting plant, Blast Furnace. HRC is produced at the Hot Strip Mill facility which is good or prime quality, so it meets commercial steel specifications. The total weight is 22.9 tons for each HRC.
With the production of steel slabs and HRC sourced from the blast furnace, it will encourage the company to produce high value-added products starting from production in the upstream areas. It hoped that the company’ quality steel products can compete well, with a record that a healthy steel trading climate can be created in the domestic market.
In the first nine month, the steel producer recorded a loss of $27.39 million, from the same period of last year $211.91 million. The revenues also decreased 10.85 percent from $1.05 billion to $938.79 million.
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