Geo Energy’s wholly owned subsidiary Geo Coal International (GCI) has issued a notice to redeem all of its outstanding 8 percent senior U.S. dollar bonds due 2022 early, the company said in a filing to SGX Sunday.
“As part of the ongoing optimisation of its capital structure, the early redemption of the U.S. dollar bonds will strengthen the group’s credit profile and save US$4.8 million in annual financing costs. The group will be funding the early redemption with its existing cash on hand,” Indonesian coal producer Geo Energy said in the statement.
The bonds will be redeemed on 10 October at 102 percent of the principal amount, plus accrued and unpaid interest to the redemption date, the filing said.
Geo Energy said the redemption also provides noteholders liquidity which might otherwise be unavailable, due to current market conditions
After the redemption, Geo Energy will have little debt and a remaining cash balance of over US$60 million, the company said, adding the balance continues to grow as Indonesian Coal Index price for 4200 GAR coal (ICI4) hit a record high of US$76.68 a tonne as of 10 September, the filing said.
Geo Energy added the redemption would allow the company to diversify its business as the bond covenants restrict its investments to only mining and related industries.
Tung Kum Hon, CEO and executive director of Geo Energy, said the company was reviewing ways to improve its asset portfolio, which could include acquisitions to diversify the business and divestments to build a more sustainable business.
“The redemption of the U.S. dollar bonds and a stronger balance sheet and capital structure will place the group in good stead to explore
diversification opportunities not restricted by the bond covenants, as we seek to expand our revenue streams by way of potential joint ventures, trading and value accretive acquisitions that are self-funding,” Tung said in the statement.