Indofood proposes early redemption of 10 3/8% notes after disagreement with trustee over tax call

New York, Dec. 2 - PT Indofood Sukses Makmur Tbk is proposing an early redemption at a premium of the $280 million of 10 3/8% guaranteed notes due 2007 issued by Indofood International Finance Ltd. following a disagreement with the note trustee over whether it can exercise the tax call.

The company wants to redeem the bonds at a price of 102 plus accrued interest on Jan. 7 or, if the there is no quorum for a meeting of bondholders on Dec. 23, at a price of 101 plus accrued interest on Jan. 13.

Investors will be asked to approve the change at a meeting scheduled for Dec. 23 or, if that meeting is adjourned, on Jan. 7.

Indofood believes it is entitled to exercise the tax call on the bonds following the termination of the tax treaty between Indonesia and Mauritius, effective Jan. 1. That change would increase the withholding tax imposed by Indonesia on payments to Mauritius residents to 20% from 10%.

But the company added that the trustee for the notes, JPMorgan Chase Bank NA, London Branch, disagrees.

The two sides disagree over whether there are "reasonable measures" the issuer can take to avoid the withholding, Indofood said.

As a result, Indofood is proposing to redeem the bonds at a premium, a change that would require bondholder approval.

If it does not obtain approval, Indofood said it will take the issue to court in England for a declaration that it is entitled to exercise the tax call. Should it obtain such a ruling, the tax call will be at par.

Jakarta, Indonesia-based Indofood makes instant noodles.

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