Indonesia woos Capital Group for airline, steel IPOs

By Janeman Latul

JAKARTA, April 15 (BestGrowthStock) – Indonesia’s state enterprises
ministry has invited U.S. firm Capital Group to invest in flag
carrier Garuda Indonesia and steel giant Krakatau Steel when
they are privatised soon, a senior official told Reuters on
Thursday.

The privatisation and listing in Jakarta of the two state
companies could raise as much as $800 million, according to
government and company officials. The proceeds are earmarked
for the companies’ modernisation and expansion, rather than for
the state budget.

Ekoputro Adijayanto, special staff to the state enterprises
minister, said the proposal was discussed with Capital — one
of the largest U.S. fund managers and, for years, one of the
biggest portfolio investors in Indonesia — at a meeting in
Jakarta.

“We have just met Capital Group and talked about some
opportunities, including offering stakes in the planned IPO
(initial public offering) for Garuda and Krakatau,” he said.

Capital Group could not be reached for immediate comment.

Investor appetite for stocks and bonds in Southeast Asia’s
biggest economy has been particularly strong over the past year
thanks to a combination of accelerating growth, relatively low
inflation, political stability, and prospects for an investment
grade credit rating.

The benchmark stock index (.JKSE: ) set an all-time high
earlier this month and is up 14 percent so far this year. The
rally has prompted several companies to announce rights issues,
share placements and initial public offerings to take advantage
of foreign and domestic interest in Indonesia stocks.

The government plans to sell a 30 percent stake in Krakatau
Steel in November for about 3.5 trillion rupiah ($388.6
million), using the proceeds to upgrade the firm’s aging steel
plants and increase production to as much as 6 million tonnes
of steel.

Krakatau Steel, Indonesia’s biggest steel producer, signed
a preliminary agreement last year with South Korea’s POSCO
(005490.KS: ) to build a new steel plant at Krakatau’s vast
industrial complex in Cilegon, West Java.

The new plant would have initial capacity of 3 million
tonnes, which would be increased to 6 million tonnes a year.

MODERNISATION

Garuda Indonesia plans to raise as much as $400 million in
its IPO in the third quarter and will use the proceeds to
refinance debt and pay for new aircraft. The national carrier
wants to modernise its fleet and has said it will buy 23 Boeing
(BA.N: ) 737-800s and one Airbus (EAD.PA: ) A330-200.

Garuda was only last year taken off the European Union’s
list of banned airlines after it improved safety procedures,
and competes with a host of budget carriers on domestic routes
across the sprawling archipelago.

“Garuda’s IPO plan will be on track next quarter as the
debt-restructuring agreement with the European Credit Agency
will be completed this month,” Adijayanto said.

The European Credit Agency is Garuda’s biggest creditor
with $241.2 million of debt. Garuda has extended the maturity
of the loans to up to seven years and the official agreement is
set to signed by the end of the month.

The Capital Group has total investments of about $1.5
billion in Indonesia, Adijayanto said, with about 5.6 trillion
rupiah invested in shares of PT Telekomunikasi Indonesia
(TLKM.JK: ), the biggest telecoms firm, and 1.3 trillion rupiah
invested in PT Bank Rakyat Indonesia (BBRI.JK: ), one of the
biggest banks.

Telkom shares, down 16 percent this year, have
underperformed the market, while BRI shares are up 11 percent.

The stock market rally has prompted a flurry of deals
including share placements for cement giant PT Semen Gresik
(SMGR.JK: ) and mobile phone operator XL Axiata (EXCL.JK: ), as
well as plans for initial public offerings and rights issues.
[ID:nJAK447521]

PT Bumi Resources (BUMI.JK: ), Indonesia’s biggest coal
producer, wants to list its non-coal mining assets which it
values at $1.9 billion, in a $1 billion initial public offering
later this year, sources told Reuters this week.
[ID:nJAK409074]

Stock Report

($1=9005 Rupiah)
(Reporting by Janeman Latul, Editing by Sara Webb)

Indonesia woos Capital Group for airline, steel IPOs