Sinar Mas Agro plans to issue IDR4 trilion bonds

PT Sinar Mas Agro Resources & Technology Tbk, crude palm oil producer, is planning to issue a IDR4 trillion bond within 2 years under shelve registration in May or June this year.

Fitch Ratings has assigned Indonesia's Sinar Mas Agro a National Long-Term Rating of 'AA(idn)' with a Stable Outlook. At the same time, Fitch has assigned Sinar Mas Agro proposed senior unsecured bond programme of maximum IDR3trilion and senior unsecured bond tranche I year 2012 of maximum IDR1 trilion National Long-Term AA(idn) ratings. 

In line with Fitch's Parent and Subsidiary Rating Methodology, the above ratings reflect the strong strategic and operational linkages between Sinar Mas Agro and its 97.2% majority shareholders, Golden Agri Resources Ltd, with Sinar Mas Agro contributing about 32% of GAR's consolidated mature plantations and crude palm oil (CPO) production. Further, most of SMART's export sales are channeled through the group's trading arm, Golden Agri International (GAI), to take advantage of GAR's established brands and networks. GAR is also guarantor of some of Sinar Mas Agro's debt.

The ratings also take into account GAR's position as the world's second-largest palm oil plantation company, as measured by planted area and CPO production, and its vertically integrated value-chain operation. The ratings further reflect GAR's favorable plantation profile; 51.1% of its matured plantation are currently at their most productive age and 34.1% are young mature and immature plantations

The company was picked four underwriters namely PT Sinarmas Sekuritas, PT OSK Nusadana Securities, PT Bahana Securities, and PT Indo Premier Securities. Sinar Mas Agro aims to spend Rp1.35 trillion capital expenditure this year to develop new planting in Kalimantan and Sumatra. The company also plans to jack up capacity to 1.35 million tons of crude palm oil to 2.6 million tons and need to requires US$400 million-US$500 million. If Sinar Mas Agro realizes the issuance it will be the first rupiah denominated bonds from Sinar Mas Group after the group declared default on bonds payments during the crisis in 1997-1998.