Rp 35.1 trillion to save BUMI

JAKARTA. The extra ordinary shareholders’ general meeting (RUPSLB) of PT Bumi Resources Tbk (BUMI), Tuesday (7/2) approved to issue rights worth Rp 35.1 trillion.

Director and Corporate Secretary Dileep Srivastava said, the rights will be issued either in May or June 2017, waiting for the approval from OJK (Financial Service Authority or FSA).

BUMI will issue 37.8 billion shares with pre-emptive rights, as well as mandatory convertible bonds (OWK). Based on the agreement with the creditors, the share of a BUMI’s share will be Rp 926.16 , or doubled of BUMI’s trading price. The price of a BUMI’s share closed at Rp 464 on Tuesday (7/2).

This corporate action gives the dilutive effect of 50.8% for the shareholders, who did not claim their rights. In this case, the unabsorbed shares will be taken over by the creditors of BUMI as the stand by buyers. Understandably, this corporate action is part of BUMI’s debts restructuring plan.

Thus, the debts that amounted to US $ 1.9 billion will be converted into shares through a rights issue. Also, there would be mandatory convertible bonds or OWK worth US$ 639 million with seven-year tenors. The rights issue may reduce the BUMI’s debts from US$ 4.2 billion to US$ 1.6 billion.

As information, BUMI’s equity was negative US$ 3.35 billion as of September 2016. In other words, the investors, who will participate in the rights issue, will buy new shares of the company with a minus capital in a price of two times higher than the current price.

Dileep added, BUMI will benefit from the corporate action. “We are optimistic that the BUMI’s equity will be back to positive after the debts restructuring is settled,” said Dileep after the extra ordinary shareholders meeting, Tuesday (7/2).

Analyst at First Asia Capital David Sutyanto said, the investors will always face the risks of share dilusion. Furthermore, the issued rights would be absorbed by the creditors as part of the debts restructuring scheme. Therefore, the risks of this rights issue will be lower than the risks of the regular rights issue. David said, the rights issue requires a decision made by OJK (Financial Service Authority or FSA). “(OJK) has authority to increase and decrease the stock price, depends on the standby buyer readiness,” he said.

Thus, the investors do not need to acquire the issued rights, if they do not want to pay an expensive price for the shares of a company with an unstable performance. "The only impact is the dilution, while the shareholding remains the same,” said analyst at Binaartha Sekuritas Reza Priyambada.

A shareholder of BUMI, Lo Kheng Hong said that the investors, who purchased BUMI’s share with the price of Rp 50 per a share, have started gaining profits, because the share price of BUMI has increased by more than 800%. (Muhammad Farid/Translator)