October 14, 2009
Adaro Indonesia: Pricing likely tomorrow; guidance around 8%, +/- 25 bps, with book 6x oversubscribed during Wednesday Asia session.

This would be an impressive result given the bond’s 10-year tenor, said investors. The only Indonesian corporate to have issued such a long tenor is believed to be the 100% state-owned electricity provider, Perusahaan Listrik Negara [PLN], which via the SPV, Majapahit Holding, issued 10-year and 30-year bond in June 2007, said one bond analyst.

Adaro’s majority shareholders include the well-respected Indonesian tycoons Edwin Soeryadjaya, Theodore (Teddy) P. Rachmat and Garibaldi Thohir. Large international shareholders include Singapore’s Noonday Capital and the Singapore government-controlled GIC.

Adaro is known for its good corporate governance and transparency which is something you rarely see in Indonesia. If it weren’t for the sovereign’s credit rating, Adaro would probably be an investment grade credit said the Hong Kong based investor.

Investors also noted that buyers of Adaro Finance’s Reg S/144A USD 400m five-year bonds issued in December 2005 profited handsomely when the company decided to redeem the bonds before maturity. The redemption occurred through a make-whole clause and at a hefty premium, the investors noted. The make-whole left bondholders with a lot of extra cash and everyone walked away with a warm, fuzzy feeling about Adaro said another Hong Kong-based investor.

October 19, 2009
Strong International Demand for Adaro’s $800 million high-yield bond

PT Adaro, Indonesia’s second biggest coal miner, raised $800 million in a blowout 10-year high-yield bond issue at the end of last week. The company priced the deal with a 7.75% yield in the early hours of Friday morning Hong Kong time, having launched the marketing process on October 5.

Asian accounts were only allocated 26% of the paper, while eager US and European investors bought 38% and 35% respectively. Funds, mostly real money portfolio managers, but including a smattering of hedge funds, took 68% of the deal, private banks were given 14% to distribute to their rich yield-hungry clients, commercial banks bought 10% and insurance companies the remaining 8%.

Credit Suisse, DBS Bank and UBS were the joint bookrunners, while Overseas-Chinese Banking Corporation (OCBC) acted as a lead manager for the Rule 144A, Reg-S issue, which has approval in principle to be listed on the Singapore Exchange.

The deal can claim several bragging rights: it is the first ever 10-year US dollar private sector corporate bond out of Indonesia, as well as the country’s largest 10-year dollar corporate, including state-backed deals. It is also the biggest Asian high-yield corporate bond launch since India’s Vedanta Resources raised $1.25 billion in June 2008.

The Deal:

US$800 million 10 year, non call 5, Reg S/144A, Guaranteed Senior Notes

• 7.625% coupon, semi-annual (431bp over 10 year Treasury)
• No restriction on dividends
• Quasi-investment-grade covenants
• If one notch rating upgrade to investment grade, incurrence ratios removed (currently rated Ba1 and BB+)
• Issued to increase financial strength

The Awards:

• Deal of the year 2009 from Asiamoney
• Best high yield bond from Finance Asia
• Best in Asia Pacific from Credit Magazine