Oct 12, 2011

Bailout for Bakrie & Bumi sale

At least three potential bidders, Glencore International AG, Texas Pacific Group-backed Northstar Pacific Partners, and commodities trading firm Vitol, are in talks with Bakrie Group in a bid to bailout the group in exchange for equity in Bumi Plc.
As written in a morning note distributed by PT Mandiri Sekuritas, citing Reuters, it is also reported that Glencore is pressing the Bakrie Group for more right to sell and option to buy shares in exchange for refinancing the US$1.34bn loan, which might take in form of debt-equity like or convertible bond.
Who is Vitol? – Vitol group is an energy trading company founded in Rotterdam in 1966. Along with Glencore and Trafigura, it is one of the world largest crude oil traders. But for the last 5 years, Vitol ha been aggressively growing presence in coal sector. In 2010 Vitol has booked a revenue of US$195 billion.
Mandiri Sekuritas said it is not clear yet  wether the Bakries would agree to lose control of its most valuable asset. The current structure, Bakrie hold voting rights about 30% in Bumi Plc. 
"Albeit the family has sold asset in the past, we still expect that the Group will be looking to structure a financing deal that retain control of its asset while addressing the margin call their loan. Please be mindful that without strong position of local partner that could help navigate local politics, the foreign investors will face difficulty in running the business especially in license renewals of the two key assets, Arutmin and KPC." Given long and strong relationship between Glencore and Bakrie’s Group, Glencore might be the most likely candidate to win the bailout mission.
The question is are they really in tight competition to bailout Bakrie Group? In fact, Bumi Plc is still below 8.5 pound sterling, the minimum price to top up the debt collateral.
What is happening right now with Bakrie Group is similar with the experience in 2008. Please check all news in 2008. 
There were so many articles about bailout to Bakrie Group. TPG and Northstar were among investors who would give bailout. But, once Bakrie Group's shares price goes up, surpassing the top up level, the story will dissapear.
In 2006, Bakrie Group suddently chased the sale of Bumi Resources to PT Borneo Lumbung Energi Tbk, owned by Indonesian rich businessman Samin Tan, as unmatched price. 
Bakrie Group believes stocks are currency. It is hard to believe that Bakrie Group will lose controlling stake in Bumi Plc or Bumi Resources. My suggestion, don't dissolve yourself into the bailout progress. I do believe Bakrie will find an exit strategy without losing Bumi Resources, the most precious asset for Bakrie. 
 
Disclosure: No position at the stock mentioned above.
 
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