As the bonds are governed by English law, the UK court decided on March 2 that it will permit Jakarta-based Indofood International Finance Limited, a wholly owned subsidiary of PT Indofood Sukses Makmur Tbk, to redeem the 10.375% eurobonds at par.
The reason Indofood sought the early redemption of the bonds that were issued on June 18, 2002 is due to last JanuaryÆs termination of the Indonesia-Mauritius Tax Treaty. The end of the tax treaty with the island nation meant the witholding tax doubled to 20% and under the terms of the bond, Indofood had to pay additional tax.
As of March 2, Indofood has concluded transactions for consensual ôbuy backö of $30 million and $280 million Eurobonds totalling (in principal amount) $158.33 million, leaving an outstanding balance of $151.67 million.
The company has not given a time frame for when it will start redeeming the bonds. However, local financial institutions appointed to handle the buyback include PT Mandiri Sekuritas and PT Trimegah Securities Tbk.
IndofoodÆs appeal overrules an earlier UK High Court decision in favour of bondholders who opposed the early redemption. However, company officials say they had held meetings with the bondholders in Singapore as early as in December, 2004 to try to reach an amicable settlement. However, the company says there were not enough bondholders to reach quorum, so the meeting had to be adjourned.
A day before the court reached its decision, Moody's Investors Service announced it had placed on review for possible upgrade the B2 foreign currency issuer rating of Indofood and the senior unsecured bond rating of Indofood International Finance Limited. That action follows Moody's decision to place the Indonesia' B2 foreign currency sovereign ceiling under review for possible upgrade.. At the same time, Moody's has affirmed Indofood's local currency issuer rating of B1 with stable outlook.