Bumi secures $600m to pay short-term debt

Indonesia’s largest coal miner PT Bumi Resources Tbk (BUMI) has secured US$600 million in loans from Chinese banks to pay back its short-term debt.

China Development Bank Corporation acts as the original lender and lead arranger of the loans and Bank of China Limited’s Jakarta branch facilitates the transaction, Bumi’s corporate secretary Dileep Srivastava said late on Wednesday.

The four-year bank loans carry a 6.7 percent interest rate plus LIBOR (London Interbank Offered Rate), the world’s most widely used benchmark for interest rates fixed daily.

“Funds collected by the company will be used to refinance the company’s short-term debts from Bank of America, Merill Lynch, Barclays and JP Morgan,” Srivastava said in a statement submitted to the Indonesia Stock Exchange (IDX).

He did not disclose the amount of loans outstanding and due to be paid. As of September last year, Bumi had $200 million in short-term loans out of a total of $6.3 billion of liabilities. Current liabilities are at $2.8 billion.

Nathaniel Rotschild, which owns a just-under 12 percent stake in Bumi through Bumi Plc after a reverse takeover deal in 2010 with Vallar Plc, wrote a public letter to CEO Ari Hudaya late last year, calling for a “radical cleaning up” as he criticized the company’s debt management and corporate governance “discount”, calling it “over-leveraged”.

The letter was made available to the public just after the Bakrie Group, which owned part of Bumi, gave up half their stake in the company for $1 billion cash to coking coal firm PT Borneo Lumbung Energi & Metal Tbk (BORN) owned by Samin Tan, to avoid defaulting on a loan owed to Credit Suisse Group.

Three months afterward, just recently, the Bakrie Group, controlled by the family of Golkar party chairman and business tycoon Aburizal Bakrie, and Samin Tan announced their intention to oust Rotschild from the board of directors to make decision-making more cohesive.

“The PT Bumi debt position is the main factor weighing on the Bumi Plc share price,” said London-based mining analyst at Liberum Capital, Richard Kinghts, as quoted by Bloomberg. “It’s enormously important for them to reduce that.”

Shares of Bumi Plc have tumbled 68.4 percent in the past one year, trading at 748 pence each on London Stock Exchange as of 6 p.m. Jakarta time. The shares dropped 0.27 percent following the debt refinancing announcement.

In Jakarta trading, Bumi’s shares closed flat at Rp 2,475 apiece, unchanged from the prior day. The shares have risen 13.8 percent so far this year, but within the past one year, they have lost 3.5 percent.