Medco's Apexindo unit to seek bigger bank loan after IPO scaled back

PT Medco Energi International Tbk said subsidiary PT Apexindo Pratama Duta will be forced to seek a bigger bank loan to fund the purchase of a Rp500 billion submersible swamp barge rig, after scaling back its planned IPO amid weak investor sentiment, AFX-Asia reported on Friday.

Under the original plan, the IPO would have funded up to 38 percent of the cost of buying the rig, but it will now fund a maximum of 20 percent, assuming the offer is fully subscribed at Rp550 per share.

"We have already talked to a consortium of mainly Japanese banks and basically what we are looking for is that we can take the loan within 6-12 months, as and when we need it," Medco investor relations officer Wira Katoppo told AFX-Asia.

"The size of the loan will depend on how much we can raise from the equity side from the IPO."

Apexindo's IPO has been revised to just 200 million shares, or 11.456 percent of its enlarged capital, from 335 million shares previously or 17.82 percent of its capital. The offer is scheduled for July 1-3.

Some 90 percent of the IPO proceeds will go towards buying the new rig, with the bank loan to fill the gap.

That means the banking consortium may now be asked to provide a Rp401 billion loan, compared with Rp335 billion previously.

"It will impact quite significantly (on Apexindo's finances), reducing the equity while in other cases increasing the debt," Katoppo said.

"It will be like a double whammy."

Apexindo's net debt to equity ratio was forecast to reach 20.6 percent this year, while total debt to EBITDA is expected to be 1.5 percent.

The return on equity was forecast at 4 percent and return on assets at 6.8 percent, Katoppo said.

However, he said Medco is confident Apexindo will be able to secure the extra funding to buy the rig, which is being built by Singapore's Keppel FELS United.

Apexindo needs the new rig to meet a 7.5 year, US$140 million gas drilling contract with France's TotalFinaElf in Mahakam Delta, East Kalimantan.

The contract is scheduled to begin in March next year, and the new rig is expected to be ready for commercial operations by the second half.

Katoppo said the only other available submersible swamp barge rig in the world is in Nigeria, and would need to be modified for drilling in the Mahakkam Delta environment.

"That's why Total approached Apexindo, they desperately need swamp barges to meet their LNG (liquefied natural gas) quota."

He added that a high daily rate of $46,000 per day on the Total contract will help Apexindo secure the bank loans to buy the new rig.

Apexindo currently has two swamp barges in the Mahakam Delta but one is out of action for the remainder of this year due to a well blow-out in February. (*)