JAKARTA: Telecommunications provider XL Axiata is set to hold a rights issue to cover its foreign debts as part of massive efforts to reduce its currency exposure and slim down debts.
XL is looking to offer up to 2.75 billion of new shares, representing around 24 percent of the company’s enlarged capital, in a rights issue planned to be executed in May, according to a statement published on the Indonesia Stock Exchange (IDX) on Monday.
The plan is pending shareholders’ approval, which will be sought in a meeting on Feb. 17.
XL finance director Mohamed Adlan bin Ahmad Tajudin did not specify how much money the company aimed to raise from the equity offer, but did say his company would use proceeds from the transaction to pay shareholders’ loans to its parent company, Axiata Investments Sdn Bhd.
“We will use the proceeds to pay our $500 million debt,” he said. The loans were made in 2014 to back XL’s acquisition of Axis Telekom Indonesia. Axiata currently holds an around 66.4 percent stake in the telecoms company, while the public owns the rest.
Shares of XL were traded at Rp 3,470 apiece on Monday after the planned rights issue was announced, a 1.77 percent increase from the previous close. The stocks have lost around 22 percent of their value in the past year, underperforming the broader local price benchmark Jakarta Composite Index’s (JCI) 11 percent drop.
Axiata has stated its intention to fully subscribe for its pro-rata rights entitlement under the rights issue, according to XL’s statement. If Axiata decides not to use its rights to buy up the new shares, its ownership will be diluted by around 8.2 percent, as listed in the prospectus.
Adlan said any remaining debts, including those in rupiah, would be paid using proceeds from the company’s tower sales. XL is planning to sell 2,500 of its 6,500 telecommunications towers in an open auction.
The company may be able to pocket Rp 4 trillion from selling its towers, going by a 2014 transaction when XL sold around 3,500 towers for Rp 5.6 trillion, or around Rp 1.6 billion for each tower.
XL has been working aggressively to reduce its currency exposure, including by paying its debts in advance, as ballooning unhedged foreign debts resulting from the acquisition of Axis have significantly eroded its bottom line.
The company saw around Rp 2.54 trillion of forex losses from financing last year, ballooning from the
|Rp 999.19 billion it reported the previous year, according to its full-year financial statement.
XL total debts declined to Rp 27 trillion by 2015 from Rp 29.6 trillion in 2014. A bulk of the debts were paid in the third and fourth quarters of last year, during which XL precipitated payment or refinanced a total of $580 million of unhedged external debt.
Its foreign debts were significantly reduced to $938 million at the end of last year from $1.59 billion a year earlier. XL’s remaining US dollar debt is now fully hedged until maturity, compared with 48 percent of loans unhedged in June.
Thanks to recognition of the gain from the 2014 tower sales, XL reduced its net losses by 97 percent to Rp 25.34 billion last year from Rp 803.7 billion in 2014, according its financial report published on Monday, the same day as its rights issue prospectus.
The company’s revenue fell by 2.5 percent yoy to Rp 22.88 trillion.
