PT Pertamina planned to sell $10 billion the same bonds in this semester of 2019 - Photo by Pertamina - Photo: Special

Singapore (TheInsiderStories) – After raised US$750 million from global medium terms note (GMTN) in 2018, state-owned energy firm PT Pertamina planned to sell $1.5 billion in this month, the chief executive told TheInsiderStories. The bond have tenure 10 and 30 year.

“We need funds to develop our refinery in Indonesia. That the funds use too,” Pertamina’ CEO Niceke Widyawati at the Bogor today (07/24).

Global rating agency Moody’s Investors Service has assigned a Baa2 rating to the proposed senior unsecured US Dollar notes with outlook stable.

“The rating reflects Pertamina’s strategically important position as
Indonesia’s national integrated oil and gas company, contributing
significant upstream production, and accounting for substantially all of the country’s refineries, fuel marketing stations and gas pipelines,” says Vikas Halan, a Moody’s Senior Vice President.

He adds, “At the same time, the rating also takes into account Pertamina’exposure to an evolving and unpredictable regulatory environment in Indonesia, weaker profitability as it absorbs the country’ fuel subsidy burden and a high degree of execution risk associated with its sizable investment plan.”

In 2018, the Government of Indonesia (Baa2 stable) agreed to reimburse Pertamina for the revenue shortfall arising from the difference between the government-set sale price and market-linked price for specific types of fuel. However, these reimbursements are not immediately accretive to cash inflows because they will be paid via installments on a deferred basis and as such, will weigh the company’ leverage in 2019-20.

Over the next two years, Moody’s estimates Pertamina’ retained cash flow-to-net-debt will be around 24 to 28 percent and remain supportive of its ratings. The Baa2 issuer rating incorporates Moody’ expectation of the very high likelihood of extraordinary support from the Government of Indonesia and very high inter-dependence between the two.

Moody’s support assessment is based on Pertamina‘ strategic importance given its important role in oil and gas exploration, petroleum product and gas distribution in the country, as well as the
government’ close supervision of its strategies and budget.

The outlook on Pertamina’ ratings is stable, reflecting the stable
outlook of Indonesia’s sovereign rating, as well as Moody’s expectation that the parent of oil and gas holding will manage its capital expenditure program.

Previously, Pertamina announced that it has commenced tender offers to purchase for cash any and all of the outstanding 2021 Notes and 2022 Notes (together with the 2021 Notes), said the company today.

The energy producer was try to offer the GMTN on October 2018 but cancelled caused the low demand. The funds from the debt issuance under the company’ US$10 billion global medium term note program will use to finance the tender offer program.

Pertamina said in a written statement said aimed to use the proceeds to finance the tender offer for its outstanding $1 billion’s 5.25 percent senior notes due 2021 and $1.25 billion’s 4.875 percent senior notes due 2022. The remaining proceeds will be used for capital expenditures and general corporate purposes.

Moody’s has assigned a Baa2 (stable) rating to the notes, S&P BBB- and BBB by Fitch Rating. The company has engaged BNP Paribas, Deutsche Bank AG,London Branch, The Hongkong and Shanghai Banking Corporation Limited, SingaporeBranch, Standard Chartered Bank and Mandiri Securities Pte Ltd as joint lead managers and book-runners for the notes.

At that year, Pertamina offered the notes holders will receive in cash for notes validly tendered and accepted for purchase by the company, $1,034.50 per $1,000 principal amount for the 2021 notes and $1,022.50 per $1,000 principal amount for the 2022 notes, plus accrued and unpaid interest on such notes in accordance with the terms of the indentures governing the respective Series of the notes to, but excluding, the payment date.

The tender offer for each series is conditioned on the company successfully obtaining funds from the new notes issuance. If the new note issuance is not completed, or is completed but does not generate sufficient funds as aforesaid, the financing condition for each tender offer will not be satisfied and either, or both, the tender offers may be terminated.

Pertamina is a 100 percent government-owned, fully-integrated oil and gas corporation, with operations in upstream exploration and production, gas transmission and distribution, and downstream refining and marketing.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com