JAKARTA (TheInsiderStories) – Indonesia oil and gas company PT Medco Energi Internasional Tbk (IDX:MEDC) has raised Rp2.64 trillion or US$195 million from a rights issue, the proceeds of which will be used for refinancing. The company claimed the rights issue was 45 percent oversubscribed.

“This is a great opportunity for shareholders to exercise their rights, share the company’s success in the future while strengthening the company’s capital structure,” said Medco Energi President Director Hilmi Panigoro in a statement, Thursday (21/12).

Fitch Rating agencies currently estimates that Medco’s post-rights issue, FFO (flow from operations) adjusted net leverage will improve to 6.0x by end-2017 and 4.5x by end-2018, from 15.5x at end-2016.

This is better than Fitch’s estimates of 6.6x and 4.8x, respectively, for fiscal years 2017 and 2018, when the ratings were assigned. The current leverage estimates also take into account a downward revision in October 2017 in Fitch’s medium- and long-term oil and gas price assumptions, which reflects lower global production costs, considerable US shale growth potential and the relatively quick supply response to changing market conditions.

Fitch maintains that a rating upgrade would only be considered if the FFO adjusted net leverage is below 4.0x on a sustained basis. On Oct. 3, 2017 Medco completed the acquisition of an additional stake in PT Medco Power Indonesia, for which it paid US$129 million (already factored into their forecasts).

The company continues to work on certain measures that may help it to deleverage faster than anticipated. These include a planned IPO of 41.1 percent-owned PT Amman Mineral Nusa Tenggara, a company that effectively owns gold and copper mines in Indonesia; the refinancing of its acquisition loan, which could return the US$250 million plus due to Medco by Amman Mineral Nusa Tenggara; and disposal of non-core assets of more than US$600 million, over the next 12 to 18 months. ​

Written by Elisa Valenta, email: elisa.valenta@theinsiderstories.com