Bumi Resources seeking loans for share buy back

Ika Krismantari ,  The Jakarta Post ,  Jakarta   |  Thu, 11/20/2008 10:40 AM  |  Business

Publicly listed PT Bumi Resources, the world's largest thermal coal exporter, is seeking loans worth US$600 million as part of a series of financing schemes to support buying back its own shares.

The massive buy back plan is to help reduce the volatility in Bumi's stock price ahead of a plan by its parent company PT Bakrie & Brothers, the investment flagship of the politically wired Bakrie family, to sell its stake in the company.

Bumi announced on Wednesday it would purchase 17 percent worth of stake in the market, being equal to 3.29 million shares valued at $824.67 million, at a price of Rp 2,500 (22.7 U.S. cents).

The share value has declined by almost 90 percent from its highest level of Rp 8,750 in June 2008.

Bumi shares dropped in value by 9.47 percent to Rp 860 on Wednesday. This steep fall triggered the automatic suspension mechanism of the Indonesian Stock Exchange (IDX).

Bumi will buy back the shares within a three month period starting on Nov. 17 running until Feb. 14, 2009.

The company has set aside internal cash of $224 million to finance the buyback, while the remaining $600 million will be acquired through loans.

So far, the company has secured $75 million from Switzerland-based bank Credit Suisse to facilitate this.

Bakrie & Brothers said the deal to sell 35 percent of its stake in Bumi to Northstar Pacific could come up empty if Bumi's share price kept declining.

Bakrie needs to sell its assets, including its stake in Bumi, to help pay its debts. Bakrie also announced earlier this week it was in talks to sell a 20 percent stake in publicly listed oil firm PT Energi Mega Persada to Brentwood Ventures Pte. Bakrie borrowed $1.39 billion and Rp 560.8 billion between April and October by putting up stakes in Bumi and other companies as collateral. However, during the Oct. 6 stock market collapse, the value of the collateral plunged.

This has forced Bakrie to either inject cash to maintain the collateral value and speed up the debt payment, or risk the stake being seized at a value deemed disadvantageous to Bakrie as a result of its collateralized debt-raising scheme.

Bumi has total debt leverage of $2.25 billion, of which $1.2 billion is under repurchasing agreements.

The company is also planning to sell medium term notes worth Rp 6 trillion, to support the buy back.

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