Govt urges Tongkang to drop bond plan

State Minister of State Enterprises Laksamana Sukardi said on Monday that he would ask PT Pertamina Tongkang, the shipping unit of state-owned oil and gas company PT Pertamina, to drop its plan to issue bonds.

"Tongkang is just a supporting company for Pertamina, they don't need to issue bonds. It is Pertamina as the controlling company that can issue them," said Laksamana without further elaboration.

He also said that the interest rate carried by the bonds was too expensive, which in turn would heavily burden Pertamina.

He added that Tongkang's debt to equity ratio was already too high.

Laksamana is also the new chief commissioner of Pertamina.

Tongkang is finalizing plans to issue rupiah and dollar denominated bonds worth Rp 225 billion (US$26.5 million) and $90 million respectively in the local and international market. The proceeds will be used to finance ship purchases and for working capital.

The dollar bond will have a tenor of seven years, while the rupiah bond an eight-year tenor. Both issues will be listed on the Surabaya Stock Exchange on Nov. 7.

Coupons for the two tranches have not yet been decided.

PT Citigroup Securities Indonesia and PT Bahana Securities are joint-lead underwriters for the issue. (*)