For the next meeting, look at Waskita Karya financial reports 2013 and 2012.

Compare the interest

rates on bank loans and the bonds issued at April 2012. What is (are) your conclusion(s)?

Based on the annual report of Waskita Karya, there are two kind of bond. The first one has
coupon of 8.75% per year, maturity 3 years and bonds amounted to Rp 75,000,000,000. The second
one has coupon rate of 9,75% per year for a period of 5 years and it was offered at
Rp.675,000,000,000.

Then the interest rate on Bank loans are on these list

The interest rate on bank loans stand for 7.87%- 9.75% at 2012, when the company decided to issue
the bonds, and the next year the rate are about 7.6%- 9.75%. There are decreasing rate from several
banks from 2012 to 2013.

There are several reasons why PT. Waskita decided to issue bond rather than made
borrowing form bank, even though the rate decreasing at 2013.

1. If the company decided to make financing by bank loan, there are terms and conditions to
follow. Beside that the interest rate somehow could increase higher because of the DER
(debt to equity ratio) of the company. The higher the DER of the waskita karya, the higher
the interest that charged to them.
2. When the company decided to make the deal of borrowing from the bank loan, they allow
the third parties to make the decisions of their business. Hence isuing bond seems to be the
right decision, because the bond holder can not make interventions of the business
decisions.
3. Bonds are long terms financial instrument, then it help the issuer to have enough time to get
profit from their business operations. Both of the bonds have fix rates, which can help the
issuer from the risk of increasing rates or floating rates.