Sep 25, 2010

Shougang ties CS, JPMorgan buy BUMI

Two Chinese companies, one of them is dubbed Shougang International, are behind Credit Suisse (CS), and another creditor JPMorgan Chase Bank N.A. aim to participate non-preemptive rights of 7.06% stakes or 1.37 billion new shares to be issued by Indonesia's largest thermal coal producer PT Bumi Resources Tbk (BUMI).  
A source familiar with the matter said two other Bumi's creditors, China Investment Corporation (CIC), through its subsidiary Country Forest Limited, and Germany Raiffeisen Zentralbank Osterreich AG have considered not to participate the non-preemptive rights.
Based on previous formal announcement published late June, there were four creditors potentially took participation during the non-preemptive rights. Bumi planned to issue a maximum 10% of new shares or 1.94 billion new shares at Rp2,366 per share, resulting a total of US$495.89 million.
But, the source said Bumi will issue 7.06% new shares at Rp2,366 per share, resulting of Rp3.31 trillion or US$361 million during the non-preemptive rights.
Bumi plans to use the proceed to reduce its debts starting from US$800 million by the end of this year and another US$800 million debt reducing next year. 
According to BUMI Q1 2010 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. 
Rizal Gozali, President Director of PT Credit Suisse Securities Indonesia, didn't know anything about CS's possibility to participate Bumi corporate action.
Aldo Perkasa, fund manager at Danareksa Investment Management, said CIC might not need a direct equity investment in Bumi.
"I think CIC feels comfortable with high cost loan [19% IRR] at BUMI, hence it doesn't require to buy BUMI new shares," he said.  But, such corporate action will benefit Bumi, resulting a lower debt level.
Another stock trader said following BUMI's debt reduction, the company's rating might be possibly upgraded by rating agencies and brokerage houses.
"With a lower debt level, I believe that several foreign brokerage houses are ready to upgrade target prices for BUMI," he said.
A 8% surge on BUMI stocks on Friday, he said, was mainly boosted by accumulative buy from foreign brokerages.

Disclosure: No position at the stock mentioned above.

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