State-owned mining holding company Indonesia Asahan Aluminium, better known as Inalum, sold bonds worth $4 billion in its first-ever US dollar bond deal on Thursday to fund the acquisition of a majority stake in the Grasberg copper mine in Papua.
The deal came amid choppy global markets, rocked by trade concerns and slowing economic growth in Asia – including Indonesia – that have made it hard for emerging market borrowers to attract investor interest.
The coupon on the bonds was lower than the initial guidance.
Inalum sold a tranche of three-year bonds at a yield of 5.230 percent, five-year bonds at 5.710 percent, 10-year bonds at 6.530 percent and 30-year bonds at 6.757 percent, according to a copy of the term sheet for the sale.
That compared with initial guidance ranging from 5.875 percent to 8 percent.
Inalum sold $1 billion in three-year and 10-year bonds each, $1.25 billion in the five-year bonds and $750 million in the 30-year paper, according to the term sheet.
The bonds were sold slightly below face value.
Inalum will use the funds to buy shares in US mining giant Freeport-McMoRan’s Indonesian unit, which owns the mine.
Freeport agreed in July to sell its stake to the government for $3.85 billion, ending a long-running dispute with Indonesia, which is seeking to gain greater control over its mineral wealth.
The sale occurs during a period of market turmoil which has seen Asian issuers hit particularly hard as rising US interest rates have pushed up borrowing costs.
The sale drew over $20 billion in investor orders, most of them from the United States.
Asset managers and fund managers represented the bulk of investors, making up 78 percent to 86 percent of buyers.
The bonds are expected to be rated BAA2 by Moody’s and BBB- by Fitch.
There is some uncertainty around the Grasberg deal as the government said it is binding while Freeport and Rio Tinto said it is non-binding.
The bond deal includes a clause that says the bonds will be redeemed at 101 percent of face value if the acquisition is not completed by June 30 next year.
BNP Paribas, Citigroup and Mitsubishi UFJ Financial Group were the joint global coordinators for the deal.