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Antam says 7 3/8% note redemption is due to jump in tax rate
New York, Dec. 8 - PT Antam Tbk. said the redemption by Antam Finance Ltd. of its $171 million outstanding principal amount of 7 3/8% notes due 2010 is due to a higher than expected withholding tax rate.
Antam Finance announced on Dec. 1 that it would redeem the notes on Dec. 29 for 100% of their principal amount plus $18.44 per $1,000 principal amount in accrued interest up to the redemption date.
The notes are guaranteed by PT Antam. The company issued $200 million of the securities in 2003.
The regular call on the notes begins on Sept. 30, 2007 but the issuer is exercising its right to redeem the notes early if the withholding tax rate exceeds 10%.
Due to the cancellation of the Avoidance of Double Taxation Agreement between Mauritius and Indonesia at the end of 2004, the tax rate has doubled to 20%, Antam said.
"We have made every effort to resolve the problem caused by the cancellation of the Indonesia-Mauritius DTA [Double Taxation Agreement] and therefore avoid invoking the early redemption clause of the bonds, but feel we are left without any options but to repay earlier than planned, according to what is allowed by the bond agreement," said Antam's president director Dedi Aditya Sumanagara in a statement.
"We value our good reputation in the international bond market, especially as regards the future financing of our growth projects, and we regret the inconvenience caused to our bond holders.
"Indeed, we wanted to pay a sweetener, but if we didn't precisely follow the terms of the notes we could possibly have run into legal trouble."
Under the structure of the issue, Antam's effective financing cost has increased to 9.22% from 8.19% because of the termination of the tax agreement.
Antam Finance is a wholly owned subsidiary of PT Antam Tbk, a mining company based in Jakarta, Indonesia. Antam Finance is based in Port Louis, Mauritius.
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