Arpeni issue convertible bond, warrant, and non-preemptive rights

24/5/2011

Irvin Avriano A.

Arpeni issue convertible bond, warrant, and non-preemptive rights

JAKARTA: PT Arpeni Ocean Line Tbk, an debt-entwined dry bulk shipping company, will issue convertible bond, warrant, and new shares through non-preemptive rights in part of the company' rescue plan.

The matter was announced at Indonesia Central Securities Depository (PT Kustodian Sentral Efek Indonesia/KSEI) today, followed by the company's announcement to Indonesia Stock Exchange (IDX/Bursa Efek Indonesia) on May 20th.

The convertible bond, warrant, and non-preemptive rights will be issued to Arpeni's majority shareholder. The extraordinary general meeting of shareholders (EGM) and the annual general meeting of shareholders (AGM) will be held on June 28th.

The issuance of the convertible bond, warrant, and new shares through non-preemptive rights was part of Arpeni's debt restructuring plan, related to net loss that been experienced amounting to IDR1.64 trio and IDR671 bio in 2010 and 2009, respectively. The company also experienced deficit of IDR1.77 trio and IDR137 bio as of 2010 and 2009, respectively.

Based on its 2010 financial statement that just published in May 5th, Arpeni's majority namely PT Mandira Sanni Pratama with 30.67% ownership. The other are PT Ayrus Prima 21.03%, Morgan Stanley & Co International Plc 9.8%, DEG-Deutsche Investitions - UE 8.67%, and public 29.81%.

A little bit about the shareholders, Mellon S/A Cundhill Recovery FD that recorded as Arpeni's shareholder at the end of 2009, not longer exist on the shareholder list on the end of 2010.

The matter of convertible bond issuance and non-preemptive rights is interesting, related to the Arpeni acquisition plan by Saratoga Capital, Sandiaga Uno private equity fund. According to the EGM plan, the scheme on the Saratoga rescue plan could be happen above Arpeni's shareholder level, not on Arpeni direct level.

To help Arpeni's rescue mission, the management already appoint global financial expert N.M. Rothschild & Son as the financial advisors. Arpeni condition also interesting because the part of Surya Family's fleet kingdom have an existing II/2008 bond worth IDR600 bio which two times interest already fails to paid.

The company also declared that they haven't receive notice letter from the bond's trustee, PT Bank Rakyat Indonesia Tbk (BRI), related to the Arpeni inability to fulfill the bond's covenant.

Arpeni already have II/2008 sharia ijarah medium term notes (MTN) which issued on June 27th, 2008 worth IDR150 bio, also trusteed by BRI. The MTN will mature on June 30th, 2011.

Arpeni also have dollar-denominated 8.75% guaranteed secured notes that issued on 2006. The notes was issued through its full subsidiary Arpeni Pratama Ocean Line Investment BV (APOL BV). The notes guaranteed by the company and its subsidiaries, except Arpeni Shipping Co Pte Ltd and PT Apol Bahtera.

APOL BV appoint HSBC Bank USA, National Association, as the notes' trustee, paying agent, and registrar, while The Hongkong and Shanghai Banking Corporation Ltd as the collateral agent.

The US$140.85 mio remaining notes still have C level rating from Fitch Ratings. Last year, the notes' interest that already matured but have not been payed by the APOL coded shares company worth IDR55.4 bio.

The matter that also interisting on the company financial statement was the selling of remaining 50% stake at Royal Tanker Shipping S.A. and its subsidiaries to Hyundai Merchant Marine Co at only US$1. But the transaction also including the Royal's debt.

The 50% stake on Royal still valued IDR68.43 bio on 2010 by Arpeni, but the half-subsidiary booked IDR25.76 bio loss on the same year.

The other is the purchasing Marigold Maritime Overseas on September 30th, 2010. Marigold was acquired through Mega Pacific Ocean Line Corporation from Julio Antonio Quijano Berbey and Horacio Valdes Barrios for only US$200, equivalent to IDR1.78 million.

The fair value of the net assets of Marigold is equivalent to the acquisition value so there is no goodwill on this transaction. Marigold is the option receiver to purchase the vessel which was

chartered from Mount Lawu LLC based on the terms and conditions stipulated in the

agreement.

Even the purchasing amount is to small for the giant-size company, the purchasing happen when the company is lack of liquidity last year, and never exposed before.