Wika president director Tumiyana said on Friday that the 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.

“The first [tranche] was an introduction, so once people get familiar with perpetual bonds, they’ll realize the bond offers a higher yield.”

“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.

“The first [tranche] was an introduction, so once people get familiar with perpetual bonds, they’ll realize the bond offers a higher yield,” he said, adding that the company would offer the bonds to foreign investors as well.

In addition to issuing a perpetual bond, Tumiyana also said the company was preparing its subsidiaries to go public next year as part of its effort to boost equity and increase debt capacity.

He said the company’s property subsidiary, PT Wijaya Karya Realty, had received a conditional permit to hold an IPO from the Financial Services Authority (OJK). “We expect Wika Realty to go public in the first half of next year,” Tumiyana said.

The company is also preparing its other subsidiaries, asphalt producer PT Wika Bitumen and industrial and construction company PT Wika Industri & Konstruksi to go public, he said. Both companies, he continued, were in the valuation process and were also expected to list their shares in the IDX in 2020.

As for the rest of this year, Tumiyana seemed confident that the company would be able to reach its new contract target this year of Rp 61.74 trillion despite the realization reaching only 41 percent of its target as of September.

The confidence stemmed from the fact that negotiations of several new contracts were still in progress, including the construction of state-owned lender Bank Mandiri’s building in Central Jakarta named Graha Mantap which will be built by its subsidiary, PT Wika Gedung.

Wika Gedung’s president director, Nariman Prasetyo, said under the 12-story office building contract worth about Rp 211 billion, the Graha Mantap building would be built under the build-operate-transfer scheme for 30 years with Bank Mandiri and is worth Rp 211 billion.

“The project is expected to be finished in 2020 and it will give additional revenue for Wika Gedung in 2021,” he said.

Popular

Government to permanently relocate 10,000 people after Ruang eruptions

Kokubo's injury time penalty save secures title for Japan

Residents fear for safety as Mount Ruang volcano erupts