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elecommunications provider XL Axiata is set to halve its total loans this year through a share offering and tower sales, a move expected to push the company back into the black.

XL is to hold a rights issue to repay shareholder loans amounting to US$500 million maturing in 2017, and will also sell 2,500 towers to pay its rupiah debts. The asset sale may generate around Rp 4 trillion for the company, going by a 2014 transaction that saw XL sell 3,500 towers for Rp 1.6 billion each. Both of the transactions, as previously reported, are expected to conclude by the end of the first half this year.

According to XL finance director Mohamed Adlan bin Ahmad Tajudin, the corporate actions are aimed at precipitating payments of the company'€™s existing debts, whereas the company'€™s maturing debts will be paid using the publicly listed firm'€™s internal cash.

XL, whose currency exposure and interest costs have been issues in its balance sheet since the 2014 debt-funded acquisition of Axis Telekom Indonesia, currently has foreign debts of $938 million and rupiah debts of Rp 12.57 trillion. XL has $88 million and Rp 800 billion of debts maturing this year, according to its published info memo, and once they are paid and payments for other debts are precipitated, the company will potentially close the year with remaining debts of $350 million and Rp 6.48 trillion.

'€œInterest payments will fall. If we want to complete the balance sheet management by the end of this year, our debt to EBITDA [earnings before interests, taxes, depreciations and amortization] level will fall to below 2 times, the level before Axis acquisition, from currently 2.8 times,'€ he explained, citing how the company might save 3 percent of annual interest and tax by paying off shareholder loans as an example. The debt to EBITDA ratio represents a company'€™s ability to pay its loans.

XL has been working aggressively to reduce its currency exposure, including by paying its debts in advance, as ballooning unhedged foreign debts resulting from the acquisition of Axis have significantly eroded its bottom line and led the company to book net losses two years in a row. The company saw around Rp 2.54 trillion of forex losses from financing last year, ballooning from the Rp 999.19 billion it reported the previous year, according to its full-year financial statement.

A bulk of debts were paid in the third and fourth quarters of last year, during which XL precipitated payment or refinanced a total of $580 million of unhedged external debt.

The rights issue and tower sales, Adlan said, were part of the strategy to maintain XL'€™s gearing level and EBITDA, by repaying its debts using equity.

As previously reported, XL is looking to offer up to 2.75 billion of new shares, representing around 24 percent of the company'€™s enlarged capital. Axiata Investments Sdn Bhd, holding around 66.4 percent of XL shares, has stated its intention to fully subscribe for its pro-rata rights entitlement under the rights issue, according to XL'€™s statement.

XL shares were traded at Rp 3,930 apiece on Tuesday, shooting up 6.85 percent from Monday, when it announced the planned rights issue.

Bahana Securities said in a published research study that it had decided to upgrade its financial estimates for the telecoms operator, particularly in light of the company'€™s solid data and digital business performance, as well as its transformation to a value-driven business model that led the company to lose data-absorbing, low-value consumers but allow a more efficient capex usage and pricing strategy.

Bahana predicted that the company would end 2016 with Rp 440 billion in net profits, reversing Rp 25 billion and Rp 775 billion of net losses it recorded in 2014 and 2013, respectively. The prediction, the analysts said, had yet to include potential proceeds from the rights issuance, but included projections from the tower sales. The research further predicted that XL would be able to cut forex losses by 91 percent to Rp 231 billion.