Publicly listed PT Bumi Resources has secured funds worth US$1.9 billion from China Investment Corporation (CIC) to restructure its debt and finance its capital expenditure.
In a statement issued Wednesday Bumi said US$600 million would be repaid in four years, another $600 million would be repaid in five years and the remaining $700 million debt would be cleared in six years. The funds attract a 12 percent annual cash coupon with a total rate of return of 19 percent.
"The investment will provide Bumi with a stable capital structure and enable its growth to accelerate. More importantly, the investment has created a platform for CIC and Bumi to pursue joint investment opportunities," said Ary Hudaya, Bumi's president director and CEO.
PT Samuel Sekuritas Indonesia acted as a broker and financial advisor for the deal, while Jones Day acted as legal adviser to Bumi. Deutsche Bank and Chinta International Capital Corporation (CICC) acted as financial advisors and Davis Poll & Wardwell acted as legal advisers to CIC in the investment transaction.
CIC, wholly-owned by the People's Republic of China, is one of the largest sovereign wealth funds in the world. Established in 2007 with assets worth $200 billion, last year it managed to expand its assets to approximately $298 billion.
CIC is known as a passive investor that tends to avoid majority ownership in a company, while staying away from potential political hassle in its overseas investments. CIC bought a $3 billion stake in Blackstone, one of the largest US private equity firms, and refrained from influencing Blackstone's investment strategy.
Bumi is one of the world's largest exporters of thermal coal. As a holding company, it controls a stake in the coal producer Arutmin, coal producer Kaltim Prima Coal, oil contractor Gallo Oil and energy marketing firm Enercorp.
Analysts seem confident about the CIC investment in Bumi Resources. PT BNI securities analyst Norico Gaman said the CIC investment was a good opportunity for Bumi to refinance its high-interest debts.
The investment, Norico said, was also good for CIC because the Chinese government needed coal for its country, and CIC receives Bumi's assets as collateral.
"CIC has been eying natural resources," he said, adding the investment would determine Indonesia's prospects in the Asian economy. He said CIC's long-term investment would be based on its interests in Bumi's coal infrastructure and production. "It's a serious investment," said Norico.