Mar 9, 2011

BUMI converts BRM notes at Rp670

Indonesia's largest thermal coal exporter PT Bumi Resources Tbk (BUMI) has converted mandatory convertible notes (MCN) issued by its subsidiary dubbed PT Bumi Resources Minerals Tbk (BRMS) into 7.40 billion new shares.
The MCN conversion is done referring to a conditional sale and purchase of receivables agreement agreed on June 23 2010 between Bumi and BRMS.
Post conversion, Bumi can enlarge its shareholding in Bumi Minerals to 22.27 billion shares or 87.09% from 14.87 billion shares or 81.84%. The MCN conversion is representing Rp670 per share of BRMS, a 5,51% higher than BRMS IPO price. So, nothing new in the transaction!
Referring to Vallar Plc prospectus, BUMI entered into a conditional sale and purchase of receivables agreement with BRM, under which BRM purchased BUMI's receivables. BUMI agreed to accept an issuance of MCN in principal ammount of Rp4.96 trillion on November 15 2010.
The conversion date of the MCN will occur only once three months after the date of the listing of BRMS shares, such as on March 9 2011. The coversion price will be 5% above BRMS IPO price at Rp635.
BRM is focusing in non-coal minerals mining business. BRMS owns indirectly 24% of the shareholding in a gold miner dubbed PT Newmont Nusa Tenggara (NNT) (representing an 18% effective equity interest) through its wholly owned subsidiary Multi Capital and its 75% owned subsidiary dubbed Multi Daerah Bersaing. BRM also controls several non-coal companies.
However, please read page 39 of  Vallar prospectus, risk relating to the operations of Bumi Resoures Group:
The Bumi Resources Group is considering various other funding alternatives for the BRM group. There can be no assurance that BRM and its subsidiaries will be able to finance the exploration, development and operations of their mining activities without credit support from Bumi Resources or subsidiaries of the Group outside the BRM group.
The Group could also lose part or all of its investments in BRM’s businesses if it fails to successfully develop them into revenue generating units.BRM will need substantial additional financing to build the infrastructure and to satisfy the other requirements necessary to develop its projects to the production phase.
As a result, BRM, and in turn the Bumi Resources Group, may become even more highly leveraged than it currently is
BRM’s ability to arrange adequate financing to develop these projects will depend, in part, upon factors outside BRM’s control, such as the lending policies of its lenders, its ability to incur additional indebtedness under the terms of its existing indebtedness, as well as upon its business, financial condition, results of operations and prospects.
There can be no assurance that BRM will be able to raise adequate financing, in time and on acceptable terms or at all, to fund development of BRM’s projects into the production phase.
Also page 144:
As of the date of this document, none of BRM’s non-coal minerals mining concessions have commenced commercial operations and production. 
There can be no assurance that the exploration, development and construction programs of BRM at its various non-coal minerals mining concessions will be successful, or that BRM will be able to develop economically viable mines at those concessions.

Today, a market rumor sent to me that Vallar Plc may intend to takeover BRMS from Bumi Resources. What do you think? Do you believe it?

Disclosure: No position at the stock mentioned above.  

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