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JAKARTA. After PT Bumi Resources Tbk (BUMI) could avoid the postponement of debt payment obligations (PKPU) and reached an agreement with its creditors, the other subsidiaries of Bakrie Group, such as PT Bakrie Sumatera Plantation UNSP), are likely to have opportunities to restructure their debts.
UNSP are optimistic that the creditors will agree with the debt restructuring scheme. Director and Investor Relations of UNSP Andi W. Setianto said, the long-term debts of UNSP will be reduced to half in 2017 next year if the restructuring process is successful.
The restructuring plan of UNSP includes shifting a worth of Rp 1.03 trillion notes payable debts into shares. In the future, this plantation company will have the option of issuing shares without pre-emptive rights.
Andi said that the discussion with the note payable holders is nearing the completion, just waiting for the implementation of UNSP’s reverse stock. However, he has not revealed the amount of the dilutive effect of this strategy.
As is known, UNSP are planning to center plans to reverse stock with a ratio of 10: 1. Every 10 shares at the nominal of Rp 100 per share will be combined into one share at the nominal of Rp 1,000. UNSP expect to obtain the reasonable price on the regular market and reach agreement with creditors by applying this strategy.
UNSP has twice held extraordinary shareholders general meeting (RUPSLB) to get approval on the reverse stock. However, the two events failed to reach a quorum. UNSP expects to obtain approval of the Financial Services Authority (FSA) to hold the third RUPSLB in January 2017, so that the restructuring process can continue.
Currently, total long-term debt of UNSP reached Rp 9.15 trillion. Most of the debts come from Credit Suisse that amounted to Rp 5.4 trillion. UNSP are still negotiating with Credit Suisse to settle the debts.
According to Andi, Credit Suisse debt would seem to be maintained, on the grounds that the majority of debt is secured under the form of plantations. "Therefore the restructuring can be done by minimizing the interests, or extending the loan tenor," Andi said, Monday (5/12).
The discussion with Credit Suisse was though, due to the decline in crude palm oil (CPO) price. To date, the CPO price is improving. “The agreement on the PKPU of BUMI reflects that Bakrie Group has recovered the creditors confident on the group. Therefore, the group’s debts restructuring is expected to run smoothly,” Andi said. He targets the restructuring will complete before the end of 2017.
Will be settled in the next year
Aside of UNSP, PT Bumi Resources Minerals Tbk (BRMS) have also found solutions to settle their debts to Credit Suisse. BRMS sold the shares of PT Newmont Nusa Tenggara that amounted to US$ 400 million to settle the debts.
Meanwhile, the Bakrie Group's investment company PT Bakrie & Brothers Tbk (Bakrie) also seek to gain the creditors approval in the next year. BNBR will restructure their debts by issuing a worth of Rp 1 trillion mandatory convertible bonds.
The rest of Rp 8 trillion debts will be partially restructured. The management of BNBR admitted that the creditor has accepted about 80% -90% of the restructuring proposal. One of the proposed options is to extend the maturity of debt or to change debt for shares.
Meanwhile, Bakrie Gorup’s property company PT Bakrieland Development Tbk (ELTY) targets a debt restructuring could be settled in March 2017. The restructuring includes p 3 trillion debt convertible bonds.
ELTY also plans to sell 38% of the shares of their subsidiary PT Graha Andrasentra Propertindo Tbk (JGLE) to settle the debt. But the debt settlement mechanism still needs approval, at least from the bondholders. Aside of selling the subsidiary’s shares, ELTY will also issue warrants or rights to buy shares or bonds at a specified price in order to increase revenues for the debt settlement. Analyst at First Asia Capital David Sutyanto said all issuers of Bakrie Group have big chances to resolve the debt problem.
However, the successful restructuring in 2017 does not necessarily automatically improve the performance of Bakrie’s issuers fundamentally. Therefore, the investors should look more closely at the sectoral conditions of each issuers. For an example, at this time, coal prices have started rising so that BUMI’s shares have better prospects in the next year.
Likewise, the increase in CPO price will enhance the UNSP’s performance. "As long as can focus on the upstream (business), the conditions will be better," he added. However, he warned that usually reverse stock will be responded negatively by the market.
Therefore, the price of UNSP shares may decline after the reverse stock. David still advised to remain cautious to penetrate to the shares of Bakrie Group. As the fundamentals of Bakrie Group issuers remain unhealthy, to date David only recommends ‘speculative buy’ for the shares of EARTH, BRMS and ENRG.
(Muhammad Farid/Translator)
