Head of the Corporate Communications Unit of PLN I Made, Suprateka, in a release in Jakarta on Thursday said that the global bonds were issued in two parts, namely $1billion with a 10-year tenor and 5.45 percent interest, and $1billion with a 30-year tenor and 6.15 percent.
"The success of PLN in issuing global bonds in 2018 proves that amid the global market turmoil, PLN`s bond is still favored by qualified investors, so that its order-book has been oversubscribed 3.65 times," he stated.
The transaction settlement process of the bonds occurred on May 21, 2018, and PLN`s global bond is listed on the Singapore Stock Exchange (SGX).
According to Suprateka, the issuance of bonds is a matter of liability management as well as debt reprofiling.
The $2 billion-dollar bond proceeds will be used to buy back or repay some of the global bonds of PLN issued in 2007 and 2009 that were due to mature in August 2019, January 2020, and June 2037.
"The global bonds were once issued with high interest rates of 8 percent, 7.75 percent, and 7.875 percent, respectively," he noted.
Global bond issuance and partial bond repurchase are done simultaneously, and so practically, no money is out of PLN`s cash.
Suprateka added that in this corporate action, PLN will get at least two benefits at once.
First, it is as an effort to carry out liquidity management and to reduce refinancing risk in mid-2019 and early 2020.
Thus, PLN almost no longer has obligations to settle the bonds worth $750 million (global bond due 2019) and $1.25 billion (global bond due 2020) as it is subsequently replaced with new global bond, which will mature in 2028 and 2048.
The second benefit is the interest cost savings, as the long-term bonds are 8 percent, 7.75 percent, and 7.875 percent, replaced by new bonds with lower interest rates of 5.45 percent and 6.15 percent.
"In addition, PLN`s corporate action this time also reduces the risk of higher interest rates in the future, because it is almost certain that the Fed Fund Rate will continue to rise in 2018 and 2019," Suprateka pointed out.
Reported by Kelik Dewanto