There is keen interest in Indofood Sukses Makmur's proposed Rp1 trillion ($116 million) five-year bond issue - a presentation in Jakarta earlier this week drew around 1,000 people, the bulk of whom were not just there for the free noodles. Indonesian insurers, among others, need rupiah assets to match their liabilities and there is a shortage of creditworthy issuers in the market to satisfy their demand. Hence the excitement caused by Indofood, the world's biggest noodlemaker, which is rated AA+ by Pemeringkat Elek Indonesia (PEFINDO).
Danareksa, Bahana and ING Barings are the three investment banks managing the issue, which will yield 15.75%-16.25%, with the final level will be set next week. One banker who attended the presentation said he considered the pricing fairly steep. "That seems a little on the tight side compared with something like Sampoerna which is A rated and trades about 50 basis points (bp) or more higher than the top of the Indofood range," he says. Nonetheless, he is confident the issue will get away comfortably, though overseas demand will be pretty light.
The Indofoods issue will consist of a Rp750 million tranche and a Rp250 million callable tranche. The latter will be repaid in the event a planned acquisition of Pinehill Arabia Food, a Saudi Arabian noodle producer owned by the Salim family, Indofood's controlling shareholders, does not proceed. Of the first tranche, Rp410 million will be used to build a cooking oil refinery in Dumai, Sumatra, and Rp130 billion to expand existing production facilities.
At end-1999, Indofood had borrowings totalling $705 million and $400 million of these have to be repaid next month. Indofood says these repayments will be funded wholly from the company's operating results. For 1999, Indofood reported a net profit of Rp1.4 trillion, including a Rp209 billion foreign exchange gain, on sales of Rp11.5 trillion.
