C

oal miner PT Atlas Resources (ARII) and Sinar Mas Group conglomerate’s plantation arm PT Sinar Mas Agro Resources and Technology (SMART) are expecting fresh cash from issuances of debt papers in the third quarter of this year to support their expansion.

Atlas aims to raise Rp 1.2 trillion (US$128 million) by issuing three series of bonds, respectively with maturities of three, five and seven years. Sinar Mas Agro will offer Rp 1 trillion three and five-year bonds of the total Rp 3 trillion planned within two year-time.

Atlas — a holding company of 22 mining firms with 199,921-hectare of mining sites in East Kalimantan, South Sumatra and Papua — will use Rp 780 billion of the funds raised from the bond offering, or 65 percent of overall proceeds to refinance its bank loans.

The remaining Rp 420 billion, or 35 percent, will be spent on working capital and capital expenditures, which covers infrastructure development and supporting facilities in five hubs connecting all of the company’s mining sites, Atlas said in a statement.

It will spend the remaining Rp 420 billion, or equal to 35 percent of total funds raised, as capital expenditure and working capital. The company said that capital expenditure would cover development of infrastructure and supporting facilities in five hubs covering all of its mining sites.

“[We will] also use it to finance acquisition of new mining sites,” Atlas’ statement reads.

Atlas’ 22 units have 10 mining operation licenses, known locally as IUPs, for production activities; five IUPs for exploration activities and two KP mining contracts.

Indonesian companies have capitalized on the current low interest rate environment to raise funds from the bond market instead of seeking bank loans, which are more expensive, to fund their business expansion plans with lower borrowing costs.

Sinar Mas Agro will use Rp 600 billion, or 60 percent of the first stage of its bond issuance, to increase the capacity of the company’s refineries to 2,000 tons per day and kernel crushing plant facilities to 1,200 tons per day. Liquid jetty and quayside facilities will also be developed.

The remaining Rp 400 billion will be allocated as working capital, which includes the purchase of crude palm oil.

Sinar Mas Agro is expecting to start an offering period on June 26 while Atlas on June 29 to July 2. Sinar Mas Agro and Atlas are scheduled to list the bonds on the Indonesia Stock Exchange (IDX) on July 4 and July 6 respectively.

Sinar Mas Agro has appointed PT Bahan Securities, PT Indo Premier Securities, PT OSK Nusadana Securities Indonesia and PT Sinarmas Sekuritas as underwrites for the bond sale.

Underwriters for Atlas are PT DBS Vickers Securities Indonesia, PT Indo Premier Securities, PT Mandiri Sekuritas and PT Standard Chartered Securities Indonesia.

Sinar Mas Agro’s bonds obtained an AA rating from local credit rating agency Pefindo, while Atlas received an A rating.

Shares in Sinar Mas Agro and Atlas were not traded on Friday, with their last prices respectively at Rp 7,000 on May 30 and Rp 1,450 on May 28.