Gajah Tunggal Issuing Bonds to Fund Expansion

Indonesia’s PT Gajah Tunggal has revealed plans to issue bonds to the value of US$95 million as part of company plans to invest in the development of two of its tyre manufacturing facilities. The company is looking at increasing its production capacity for motorcycle tyres in order to keep pace with demand both for its own products and those local market products it manufactures under licence for Michelin.

Catharina Widjaja, director of Gajah Tunggal, stated the company requires $170 million to develop the two facilities. The first of these upgraded factories will re-enter production in 2009 with a daily production capacity of 45,000 units, an increase of 15,000 units.

According to Standard & Poor’s, the new bonds will bring the company’s total debt to $325 million, and the agency granted the bonds a B rating with a positive outlook The debt will reach maturity in 2010. While Gajah Tunggal’s profits dropped from IDR215.63 billion (£12 million) to IDR12.83 billion (£716,000) during the first quarter of 2007, sales revenue during the same period jumped from IDR1.22 trillion (£68 million) to IDR1.53 trillion (£85 million). The company attributes the much reduced profits to unfavourable changes in exchange rates since the first quarter of 2006.