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View all search resultsWika turns to perpetual bonds, subsidiary IPOs to boost financing capacity
Wika hopes to raise about Rp 1 trillion (US$71.5 million) from the issuance of its second perpetual bond next year.
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Workers check precast concrete produced by PT Wijaya Karya Beton at its factory in Cileungsi, Bogor, West Java . State-owned construction company PT Wijaya Karya (Wika) will issue perpetual bonds next year to boost its financing capacity. (Antara/M Agung Rajasa)
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T Wijaya Karya (Wika) has planned a number of corporate actions ranging from issuing another perpetual bond to selling shares of its subsidiaries through an initial public offering (IPO).
The company’s president director Tumiyana said on Friday that the state-owned company expected to raise about Rp 1 trillion (US$71.5 million) from the issuance of its second perpetual bond next year.
A perpetual bond is a debt paper that has no maturity date and is often considered as equity rather than debt. Given the nature of the instrument, investors can get a steady stream of cash from the interest payments as long as the issuer does not make a call option for the note. However, this creates a drawback for investors as they are unable to redeem the bond.
“With the bond we aim to increase our equity and also increase our debt capacity,” Tumiyana said, adding that the issuance would follow Wika’s first perpetual bond issued late last year.
Wika raised Rp 600 billion from the issuance of its first tranche of perpetual bonds, which offered a coupon of 10.5 percent per year, in late December 2018, according to the company’s notice on the Indonesia Stock Exchange (IDX) website. The bond is the first tranche of the shelf registered perpetual bonds planned by the company.
Although the debt paper does not have any maturity date, Wika could put in a call option in the third year and the fifth year after the issuance. If investors chose not to redeem their money during that time, however, Wika would give them an additional 2 percent return in the third year and another 4.5 percent return in the fifth year.
Despite the fact that the first issuance of the perpetual bonds fell short of the publicly listed company’s target of raising Rp 1.4 trillion, Tumiyana was confident that the second tranche would be fully subscribed.
