As part of its efforts to stave off currency related risks, Indonesia’s major mobile telecom player PT XL Axiata Tbk (EXCL) is refinancing, converting and extending the payment part of its US dollar denominated debts, according to a company filing to the Indonesian Stock Exchange.
The company announced that it has paid up unhedged $50 million of loans borrowed from United Overseas Bank (UOB) nearly two years ahead of its maturity in 2017. Last month, XL Axiata paid around $100 million of its debt to UOB before its due date.
At the same time, XL Axiata has also decided to convert $180 million of its loans from Japan’s Bank of Tokyo-Mitsubishi UFJ into rupiah. According to the company’s financial report in June, around 48% of its total $1.55 billion dollar-denominated loans are not hedged.
“These moves are among our initiatives to proactively reduce currency costs,” XL Axiata president director Dian Siswarini said in a statement. The company has used its internal reserves to prepay the debt.
She said, the loan payment for UOB and debt conversion to Bank of Tokyo Mitsubishi was still in early stage of discussion, initiated by the company and would be undertaken in the coming months. The move is aimed to reduce currency exposure on the company’s unhedged foreign currency liabilities.
In the first half of the year, XL Axiata recorded Rp 850.89 billion in losses mainly due to the weakening of the rupiah, doubled from Rp 444.81 billion in the same period in 2014.
The company’s net profit was lower in mid-year of 2015, partly due to foreign exchange losses which incurred as a result of the acquisition of PT Axis Telekom Indonesia as well as higher operational costs. The acquisition was partly funded by loans, which caused the company’s debts to balloon.
In the middle of 2015, XL Axiata acquired 95 per cent stake of Axis from Saudi Telecom Company for $865 million. After the acquisition, XL Axiata has about 10,000 telecommunication towers, about 1,600 units are owned by Axis.
The firm received a $500 million loan from its holding company Malaysian Axiata Group Berhard and the remaining $365 million from banking institutions, namely UOB, the Bank of Tokyo Mitsubishi and Singapore DBS Bank.
XL Axiata is now seeking funds up to Rp 1.5 trillion from Islamic Bonds (SUKUK) issue this year to refinance part of its debts.
Fitch Ratings affirmed the ratings XL Axiata on long-term global debt securities and debt securities of dollars at the BBB level. BBB rating for XL Axiata is closely related to the parent company’s credit strength of 66.5 per cent EXCL the Axiata Group Berhad.
The Axiata Group is a Malaysian telecommunications firm that holds a 66.5 per cent stake in Indonesian unit, while the public holds the remaining 33.5 per cent.