UT to launch rights issue, sells 60% stake in Berau Coal

Publicly listed heavy equipment maker PT United Tractors announced on Friday it planned to issue some 1.85 billion new shares through a rights issue next month to raise cash to refinance its debt.

The company said in a statement to the Jakarta Stock Exchange (JSX) that it expected to raise up to Rp1.76 trillion (US$207 million) in proceeds from the rights offer.

The indicative price of the new shares is to be set between Rp350 and Rp950 per share. The exact price will be determined after shareholders approve the plan at an extraordinary meeting on May 14.

The new shares are to be listed on the JSX between May 31 and June 7. UT did not mention the ratio of the rights issue.

The company said around 80 percent of the proceeds would be used to repay debts, while the remainder will be used to finance business operations.

UT has been trying to restructure its $241 million debt.

The company's creditors include Sumitomo Corp., Marubeni Corp. and state-owned Bank Negara Indonesia (BNI).

UT, which is 49 percent owned by PT Astra International, the country's largest automotive company, holds a 40 percent share in the domestic heavy equipment market.

Despite a slight decline in sales, UT recorded a net profit of Rp342 billion last year, up from Rp300 billion in 2002. During the same period, its sales figure dropped to Rp6.87 trillion from Rp6.88 trillion.

Last week, UT's mining contractor unit PT Pamapersada Nusantara (Pama) won a $1 billion coal exploration contract from East Kalimantan-based coal mining giant PT Kaltim Prima Coal (KPC).

Pama is also a contractor for other coal mining firms.

Pama plans to buy equipment from UT to fulfill the KPC contract, and the purchase is expected to help increase UT's sales by 10 percent this year.

Coal mining-related business contributed 40 percent of UT's revenue last year.

In a related development, UT also announced on Friday that PT Indika Inti Corpoindo (IIC) had agreed to buy all of UT's 60 percent shares in in East Kalimantan coal mining firm PT Berau Coal for $44.56 million.

The divestment is part of UT's efforts to repay debt.

According to UT, IIC also agreed to pay Berau's debts worth $25.44 million to UT and coal mining contractor Pamapersada Nusantara.

UT said transaction is expected to be closed by July 30, 2004, while the Sales and Purchase Agreement would be dropped if no transaction occurred as of August 31, 2004.

According to UT, its 60 percent shares in Berau has been appraised at US$44.89 million by consultant firm PT Asian Appraisal Indonesia.

UT also said IIC has paid an initial payment of $6 million.

UT planned to hold a shareholders meeting on May 14 to get approval as required to complete the transaction.

A side from its shareholders, UT also needs permission from the existing shareholders of Berau on the pre-emptive rights. Other shareholders of Berau are Armadian Tritunggal (30 percent) and Japan's trading powerhouse Nissho Iwai (10 percent).

Berau is one of Indonesia's top coal producers with a production of 7.46 million tons of coal last year. (*)