Jun 23, 2010

CIC, CS, JPMorgan to swap BUMI's debt

Four largest creditors of Indonesia's biggest thermal coal exporter PT Bumi Resources Tbk (BUMI) may participate in non preemptive rights of maximum 10% of new shares or 1.94 billion shares. That means BUMI may convert its debts into new shares.
In parallel, BUMI also announces today 2 months delay of accomplishment of non preemptive rights from initial schedule on July 30 2010 to September 30 2010.
A source said the two months delay will boost uncertainty of the debt conversion, continuing to erode investor's trust to Bumi management. "What will happen is reflecting to Bumi shares price. People have waited for too long," the source said.  
In the second announcement published by BUMI management today, four creditors may involve non preemptive rights. They are Country Forest, wholly owned by China Investment Corporation (CIC), Raiffeisen Zentralbank Osterreich, Credit Suisse (CS), and JPMorgan Chase Bank N.A.
Bumi said the non preemptive rights will be held at Rp2,366 per share, allowing it to grab around US$495.89 million of cash. In return, it will potentially shrink BUMI's debt from US$5.92 billion to US$5.44 billion.
According to BUMI Q1 financial report, the company booked US$1.76 billion of debt to CIC, US$80.15 million of debt to Raiffeisen, US$291.37 million of debt to Credit Suisse, and US$145.93 million to JPMorgan Chase Bank.
Kim Eng Securities in a morning notes today said the announcement reaffirms conviction that Bumi is planning to swap debt with CIC.
However, there are no cash proceed from such new shares issuance. "We believe the decline in gearing ratio is only temporary. We recommend sell on the counter with target price at Rp1,620 per share, pegging the stock at 9x FY 10 price to earning ratio," the notes said. BUMI shares price this morning falls 0.52% to Rp1,920 per share.

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