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Bumi refuels certainty with bankruptcy shield plea
Indonesia’s largest coal exporter Bumi Resources claimed on Tuesday that its US$4
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ndonesia’s largest coal exporter Bumi Resources claimed on Tuesday that its US$4.2 billion debt-restructuring plan is on the right track following its recent decision to file for bankruptcy protection in the United States.
The politically wired Bakrie family’s company, which holds the title of the most indebted coal miner in Southeast Asia, petitioned a Manhattan bankruptcy court on Jan. 20 for protection under Chapter 15, the section of the US bankruptcy code that deals with international insolvency matters.
“We have already filed for the Chapter 15 protection just to make sure that there will be no disruption, which means that we can be allowed to close the [debt-restructuring] process smoothly,” Bumi director and corporate secretary Dileep Srivastava said.
In the US, Chapter 15 proceedings are known as secondary bankruptcy proceedings relating to a foreign individual or entity, which can take place while the main proceedings are being processed in the home country of the entity.
Chapter 15 allows the foreign entity to get protection and maximization of the value of its assets as it facilitates the rescue of financially troubled businesses, thereby protecting investment and preserving employment.
While the review of the company’s application is ongoing, Dileep expects the court to grant Bumi Chapter 15 status by the end of the month.
Earlier in November, the Central Jakarta Commercial Court ratified Bumi’s proposed debt-restructuring plan following its inability to pay liabilities amounting to Rp 135.78 trillion ($10 billion) to 270 creditors and bondholders.
However, the company has claimed that its commercial debt only stands at $4.2 billion, which will reduce to $1.6 billion once the company’s debt-restructuring agreement is implemented.
The scheme includes a plan to convert Bumi’s debt into shares, also known as a debt-equity swap, at a premium price of Rp 926.16 apiece. The company’s share price stood at Rp 464 apiece as of Tuesday, up by 58.9 percent since the court ratified its plan.
The company is also expected to issue tradable contingent value rights (CVR) worth $100 million for creditors of Bumi’s new senior secured bond. The CVR will fall due in five years.
Moreover, there is another plan to issue mandatory convertible bonds (MCB) worth $639 million with an annual coupon rate of 6 percent and a maturity period of seven years. The company also aims to replace the 32.24 percent of its debt that is owed to China Development Bank (CDB) with a new senior secured bond or a tranche C facility.
“As initially planned, the extraordinary general meeting was held today [Tuesday] to inform the shareholders about our proposed equity issue and seeking their approval as a follow-up to the debt-restructuring process. The shareholders gave near unanimous approval to our plan,” Dileep said.
Bumi plans to issue the MCB and also 29.1 billion new shares as part of its debt-equity swap in around May or June.
University of Indonesia international legal expert Hikmahanto Juwana said it was normal for Bumi to seek Chapter 15 protection, which is often used to manage cases related to cross-border insolvency.
“Bumi is worried that its US creditors, which hold its bonds, will ask for the company’s bankruptcy. Hence, Bumi has tried to file for Chapter 15 protection to get legal protection from the Manhattan court to ease its debt-restructuring plan,” Hikmahanto told The Jakarta Post.
In the wake of the recent surge in global coal prices, Bumi is looking for a chance to produce up to 100 million tons of coal in 2017, double from what it was 10 years ago.
