PT Graha Layar Prima Tbk (BLTZ) conducted their first Limited Public Offering targeting proceeds worth Rp 650 billion. From the figure, Rp 250 billion will be used to pay debts when in fact, the company’s total liability is only Rp 367 billion. This means that the company chooses to pay bigger capital cost than cost of debt to run the company.
While it does not often look like it, shareholders actually expect much bigger returns than bondholders. Why? Obviously it is due to the higher risks being incurred. In terms of liquidation, shareholders obtain their portion last. Likewise, dividend will be paid out only when bills have already been paid.
On the financial report of March 31 this year, BLTZ was recorded to have total liability of Rp 375.6 billion. Of the figure, only Rp 177.1 billion reflects interest-bearing loan while the remaining liability is due to business and tax debt. Debt-to-equity ratio is only 0.80 times. If all those are paid with proceeds from the first LPO, the ratio will become 0.10 times.
Moreover, both loans coming from Standard Chartered Bank and KEB Hana Bank have a not-so-high interest rate, standing at 14%. (*)
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