BUMI reached agreement with creditors

JAKARTA. PT Bumi Resources Tbk (BUMI) is likely to reach agreement with the creditors, including China Development Bank (CDB) to settle BUMI’s debts.

In early November, BUMI has published the results of voting of the creditors related to the debts’ settlement of BUMI. Majority of creditors approved the settlement plan offered by BUMI. At that time, CDB has not taken a stance on the proposal.

Rumors are circulating in the market said that CDB finally follow the majority of creditors to approve the proposed debt settlement proposal. Director and Corporate Secretary of Bumi Dileep Srivasava has confirmed this. Dileep added that voting consisted of 100% concurrent creditors and 99.84% separatist creditors.

CDB was included to the separatist creditors along with other 97 creditors. The total debts of BUMI to CDB amounted to Rp 47.72 trillion.

There were 142 creditors with a total bill of Rp 39.27 trillion. All of concurrent debtors agreed with the debts settlement proposal.

BUMI has filed a number of clauses to settle the debts, including releasing a worth of US$639 million mandatory convertible bonds (MCB). The creditors include Country Forest Limited (CFL), Axis Bank, UBS and Deutsche Bank (DB).

MCB has a coupon of 6% per annum and a maturity of seven years from the effective date. Meanwhile, the restructuring plan to the CDB will include the replacement of 32.24% debts with new senior secured facility and / or new note 2021. The others will be replaced with tranche C facility.

Both sides also agreed on the issuance of a worth of US$ 100 million of contingent value rights (CVR) that can be traded. The five-year tenor CVR will be released to settle BUMI’s new senior secured debts. Another clause is the conversion of debt to equity swap scheme.

This scheme will involve 11 creditors, including CFL, Castleford Investment and Axis Bank. The conversion value equivalent to 39.39% of BUMI’s shares.

Under the scheme of debt to equity swap, the creditors are eligible to have its representatives in the management of BUMI. "The creditors, including China Investment Corporation (CIC) will have representatives on the board of directors and commissioners," Dileep added.

To be sure, BUMI is scheduled to issue rights on 30 June 2017, while the trial of the Suspension of Debt Payment (PKPU) will be held on November 28, 2016.

Previously, analyst at Samuel Sekuritas Sharlita Malik estimated that the BUMI’s debt restructuring may be essential to boost the company’s long term performance.

He estimated that the intrinsic value of BUMI’s shares could reach Rp 608 per a share if the restructuring is successfully. The estimation was made based on the position of EBITDA at the historical level when the coal price hit around US$70 per ton.

The BUMI’s debts will drop to US$ 1.7 billion if the restructuring is successfully. However, the estimation may be missed if the coal prices drop and the restructuring process is not running accordingly. (Muhammad Farid/Translator)