Gajah Tunggal Considering Share Issue

PT Gajah Tunggal Tbk is considering raising some funds through a rights issue next year. According to a senior executive said, quoted by the Reuters news agency, Indonesia’s Gajah Tunggal wants to reduce its debt-to-equity ratio to 1.0, from 1.6. According to director Catharina Widjaja the rights issue is not expected to be too large. “We are reviewing an option for a rights issue, possibly next year. The funds would be used to lower our debt ratio. For any corporate actions and capital expenditure, we still have the money from our latest bond issue,” Widjaja told reporters.

Widjaja said that the company has $20 million of fixed rate notes maturing in 2007 and a further $50 million maturing in 2008, and that Gajah Tunggal could reduce its debt ratio by repaying the notes out of its cashflow.

Gajah Tunggal is controlled by Sjamsul Nursalim, while Michelin holds a 10 per cent stake. Last year, Gajah Tunggal’s net profit plunged 66 per cent as Indonesia’s automotive market was hit by high interest rates and weak consumer spending.