Towers of plenty

IFR Asia - South East Asia 2015
6 min read

Indonesian telecom infrastructure firm Tower Bersama is emerging as a regular international issuer, with its sights set on longer-term funding.

Tower Bersama finds itself in an enviable position among Indonesian corporations. It is the one of the largest telecom tower companies in the country and has an established track record of issuing debt in the offshore markets. This, along with steady revenue streams, has enabled the company to price some of the country’s cheapest corporate debt, turning to US dollars to beat high local interest rates.

The firm’s most recent deal received orders of more than US$1.7bn for a US$350m offering of senior unsecured seven-year non-call four notes, priced to yield at 5.25%.

The investor enthusiasm for the offering prompted some arguments that the Asian high-yield market was coming back to life. Shortly after the issuance, rival Solusi Tunas Pratama priced a US$300m offering of five-year non-call three notes at a yield of 6.25%.

Prior to its latest offering, Tower Bersama’s most recent capital markets move was a US$1.3bn syndicated loan for expansion and debt refinancing in July 2014. The majority of its capital markets activities are in the loans market.

“The main reason we’re in the bond market is because we’re trying to get tenor. We did a five-year bond and we just did a seven, and, most likely, next we’d prefer to do a 10-year. We don’t really need to go to the market, but a 10-year is something we’d like to develop as a way to get longer-tenor debt for our longer-life assets.”

Bankers working on these deals have lauded the firm’s management, saying it is a credit that investors really like. Based on the way the company operates, revenues are largely fixed and long term, and it has a low cost structure, where earnings become very predictable. The company provides telecom firms with the infrastructure they need to operate, giving investors exposure to Indonesia’s fast-growing communications sector.

“It (the most recent deal) was a good trade and investors really like the credit,” said James Holian, head of Asian debt syndicate at ANZ. “Tower Bersama has a great management team and generates very stable cash flows. So, you’re getting access to Indonesia in a very stable company at a good yield, compared to some alternatives in Europe and the US.”

ANZ was a joint global co-ordinator on the latest issuance, along with Bank of America Merrill Lynch, Citigroup, Credit Agricole and UBS. These firms were also joint bookrunners with BNP Paribas, DBS, CIMB, HSBC, MUFG, OCBC, SMBC Nikko and UOB. The bond currently trades between 99.5 and 100.51 according to data from Thomson Reuters.

Tower Bersama co-founder Gavin Caudle said he did not expect 2015 to be an active year in terms of debt capital markets. There was no funding target for the year, and he said the company accomplished the refinancing it wanted to do with the most recent deals. Caudle added that, if there was a strategic move the company wanted to make, there was plenty of money in reserve.

“I wouldn’t expect to see any DCM activity,” Caudle told IFR. “We just did the bond and, basically, we’ve got unused lines of credit as we speak right now and more than US$600m in the bank. So, we’ve got plenty of firepower. We’re not looking at too much activity in the capital markets for a while. Our cash flow is at a point where it is close to being able to fund all capital expenditure.”

When Tower Bersama does return to the international markets, however, it will be keen to do a 10-year deal. Caudle explained that what Tower Bersama eventually wanted was longer-tenor funding. The company had considered going to 10 years on the latest issue, but complications arose around making it a 144A. So, it was decided that a Reg S at seven years was more straightforward.

“The main reason we’re in the bond market is because we’re trying to get tenor,” he explained. “We did a five-year bond and we just did a seven, and, most likely, next we’d prefer to do a 10-year. We don’t really need to go to the market, but a 10-year is something we’d like to develop as a way to get longer-tenor debt for our longer-life assets.”

When that will happen is not entirely clear. Caudle implied that the firm was in no rush, but that it could come as early as next year.

Company officials explained that the main risk they faced was the strength of the telecom companies Tower Bersama served. If clients run into trouble, it can disrupt revenues, but, for now, there does not appear to be much concern.

There was little indication that its strategy moving forward would be acquisitive, or such that it would need money to finance any expansion.

Regardless, Caudle suggested that, if the right moment came to do a 10-year bond, whether it was as early as next year or much longer down the road, the company would do it if the deal felt right.

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Towers of plenty