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Bumi seeks to settle debts as rights issue is slashed
Coal miner Bumi Resources revealed on Monday that it was mulling other options to pay its maturing debts after the company failed to collect US$275 million from a rights shares offering that was under-subscribed
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oal miner Bumi Resources revealed on Monday that it was mulling other options to pay its maturing debts after the company failed to collect US$275 million from a rights shares offering that was under-subscribed.
Bumi president director Ari Saptari Hudaya said on Monday that only 11.53 million shares were subscribed by the public, while the company had planned to issue 12.65 billion new shares and collect $275 million as part of its efforts to repay debts.
'Given the under-subscription, we decided to cancel the rights issue for the shares,' he said during the company's public expose event. 'We will negotiate with our lenders and contractors over the issue.'
Ari deplored that Bumi's existing shareholders did not exercise their right to buy or subscribe to the offered rights shares.
'Where are our shareholders when we are facing such difficulties?' he lamented. A shareholder responded by saying that he had decided not to exercise his right as he did not want to suffer losses.
The shares were offered at higher than the market price, the unidentified shareholder said. He added that another factor that made him reluctant to take up the shares was that he had 'lost trust in Bumi'.
- Bumi cancels $275m rights issue as shares go under-subscribed
- May extend tenors of debts or seek new loans with lower interest rates
- Firm upbeat on business as operations remain strong, but high debts should be addressed
Bumi shares were suspended by the bourse on Sept. 24 because it had yet to report the result of its planned right issue. The stocks reopened on Monday's trade following the public expose, trading at Rp 190 apiece.
The rights issue was part of Bumi's bigger plan to collect Rp 8.05 trillion by issuing 32.2 billion rights shares at Rp 250 apiece.
Under the initial rights issue plan, Bumi's majority shareholder, Long Haul Holdings Limited and Castleford, would take new unsubscribed shares, each absorbing 6.9 billion shares or equal to $150 million, which would be used to settle its debt to the China Investment Company (CIC). The shares allocated to Castleford were to be used to pay Bumi's debts in a debt-to-equity mechanism.
Up to 2.04 billion new shares were allocated for a standby buyer.
Bumi also planned to use up to $48 million from the proceeds for its Gallo oil project in Yemen and $32.58 million for its contractors in its Gorontalo minerals project.
Bumi is negotiating with its lenders over ways to pay a total of $275 million that the company obtained from Axis Bank Limited, Credit Suisse, Deutsche Bank, UBS AG and CDB, Ary said.
'We will either extend the tenors of the debts or look for new loans with lower interest to refinance the debts,' he added.
Dileep Srivastava, Bumi's corporate secretary, was upbeat his company would be able to restore investors' trust and pay the debts, given the company's improving financial performance and production, as well as optimism that coal prices would pick up in the coming years.
He said his company was on track to produce up to 90 million tons of coal this year, up from 80 million tons last year, and was capable of producing up to 100 million tons next year.
It also booked a $168 million net profit in the first half of this year, in contrast to a $248.6 million net loss in the same period last year.
'We are fundamentally and operationally strong. Our problem is the high level of debt and high interest costs. This is what the company is focusing on, reducing our debt from $4 billion to about $2.5 billion by the end of next year and bringing it down further at the rate of $2 billion thereafter,' Dileep said.
He said the company had taken steps to restructure the debt, including closing the remainder of its $1.4 billion debts to CIC with the proceeds of the rights issue and to have the due of its $375 million convertible bonds extended from 2015 to 2018.
'Just before the CIC deal, we incurred $600 million a year in interest costs. We want to go down to about $200 million and save $400 million,' Dileep said.
