Bakrie, Northstar conclude talks on debt buyout scheme

Ika Krismantari ,  The Jakarta Post ,  Jakarta   |  Fri, 12/26/2008 11:21 AM  |  Business

PT Bakrie & Brothers, the flagship company of the wealthy and politically wired Bakrie family, announced Thursday the firm and Northstar Pacific Partners would form a 70:30 joint venture which will hold 21.4 percent stake in Bakrie's giant coal unit PT Bumi Resources.

The announcement marked the finalization of terms and conditions in an initial partnership agreement signed late last month under which Northstar will buy out Bakrie's debt of US$575 million to Oddickson Finance, Bakrie president director Nalinkant A. Rathod said in a media statement issued Thursday.

"We are delighted that this process has finished within the committed schedule," Nalinkant said.

"Above all, the most important benefit for the company is that not only have we executed this agreement with Northstar, but also solved the outstanding debt problem," he said.

Bakrie owns 35 percent stake in Bumi.

Bakrie pledged 21.4 percent of Bumi shares and 43.2 percent of PT Energi Mega Persada (EMP) shares to Oddickson. A stake in other units has been used as collateral, but it is unclear whether the joint venture will manage these interests too.

Bakrie's debt to Oddickson had at one stage reached $1.08 billion, but dropped to the current amount due in part to currency gains and previous debt settlements.

In addition to selling Oddickson's debts, Ancora Capital Management Ltd., founded by JPMorgan alumni Gita Wirjawan, has taken over $72 million of Bakrie's debt from JPMorgan in return for around 5 percent stake in Bumi.

Nalinkant said in the statement that Bakrie had an option to buy back Ancora's stake in Bumi.

On Wednesday, Ari Hudaya, a Bakrie director, announced another debt settlement, under which Australian hedge fund Brentwood Ventures Pte has repaid Bakrie's $105 million debt owed to India's ICICI Bank Ltd. in return for a 6.7 percent stake in Bumi, Asia's largest thermal coal exporter.

Bumi contributes some 88 percent of the Bakrie group's total profit. With sales last year of $2.26 billion and a net profit of $789 million, Bumi is considered the Bakrie group's "bread and butter".

Bakrie has been striking deals, including sales of stakes in units, to help pay its $1.2 billion debts after shares in Bumi and other Bakrie Group firms, pledged as collateral, slumped during the October stock market rout. The debts are backed by stakes in some of its units.

Shares of the units, which had been put up as debt collateral, dropped significantly due a combination of the global financial crisis and concerns the group may be unable to repay its debts. Bumi alone has tumbled 74 percent over the last three months, according to Bloomberg.

Set up in 2003, Northstar is the Indonesian arm of TPG, founded by U.S. billionaire David Bonderman. Local businessman Patrick Walujo is Northstar's co-founder and co-managing director.

Copyright © 2008 The Jakarta Post - PT Bina Media Tenggara. All Rights Reserved.