Bumi Resources, the coal-mining unit of Bakrie Group, hopes to conduct a debt-to-equity swap with China Investment Corporation by the end of the year.
The company is working to strike a new deal with CIC in order to accelerate its debt reduction program.
Bumi will swap its $1.3 billion debt and surrender its 19 percent stake in coal-miner unit Kaltim Prima Coal (KPC), 42 percent stake at Bumi Resource Minerals, and $150 million worth of Bumi Resources’ shares.
Under the deal, CIC will receive $1.36 billion, which would leave the firm owing $430 million.
Andrew Beckham, finance director of Bumi Resources, told shareholders during a meeting on Wednesday that the remaining debt would be paid over three years at approximately 7 percent interest — a lower rate than the previous debt deal, which saw CIC receive 12 percent.
“We will put the offer to shareholders next month and if they approve, then we move quickly to finish, possibly by year-end,” he said.
A debt reduction could save the company as much as $216 million in annual interest payments.
Company director Dileep Srivastava added that the significant reduction in interest expenses “could possibly” bring Bumi to a break-even or even to a positive bottom-line “by the end of 2014.”
Finance director Beckham also expects some improvement in the global coal price and the rupiah’s position against the dollar to further help financial performance.
A possible global recovery may mean coal prices improve, putting the company into positive territory.
In the first nine months, the company posted a $377.5 million net loss, narrowing from $623.5 million a year earlier with revenue falling 4 percent to $2.65 billion.
Beckham also said the company will maintain control over KPC despite its current 65 percent ownership being diluted by the deal with CIC. “We will have additional 5 percent [stake at KPC] through a settlement with Recapital,” Beckham said.
Recapital Asset Management and its affiliate Bukit Mutiara owe Bumi Resources about $300 million.
Meanwhile, Bumi Plc chairman Samin Tan said he had won funding approval to buy part of the Bakrie Group’s stake in Bumi Resources, meeting a deadline to end the battle for control of the company.
“Funding to acquire the Bakrie’s stake as part of the overall separation transaction has been approved by our funding bank,” Tan said. “The loan agreement has been drafted subject to inclusion of a couple of commercial terms, which are targeted to be finalized today.”
Tan has until today to satisfy Bumi Plc’s board that he can fund his share of a $501 million deal to sell its stake in Bumi Resources to the Bakries.
London-traded Bumi Plc has been at the center of a battle for control between the Bakries and fellow founder Nathaniel Rothschild. Tan has agreed to buy the Bakries’ 23.8 percent holding in Bumi for $223 million.
Shareholders will vote on the separation deal on Dec. 4.
Bumi Plc had yet to receive proof that the Bakrie Group can finance its share of the transaction, chief executive Nick von Schirnding said on Nov. 8, while a spokesman for the Bakrie Group, Chris Fong, said funds for the Bakries’ $278 million share of the offer had been available since January in the form of a “direct cash investment by the Bakrie family.”
Additional reporting by Bloomberg
The post Bumi Hopes to Strike a Debt Deal With CIC By Year-End appeared first on The Jakarta Globe.