Glencore International AG, the world's biggest diversified commodities trader, is nearing a deal to lend US$800 (508.68 pounds)-US$900 million to Indonesia's Bakrie Group to help it refinance debt of US$1.35 billion and stave off a potential default, sources said.
In return, as quoted by Reuters, Glencore will be given additional marketing rights on coal produced by Bakrie-controlled Bumi Plc (BUMIP.L) and the loan will be backed by part of the Bakrie Group's 47 percent stake in the coal miner, the sources with knowledge of the deal said on Thursday.
Shares in Bumi Plc, a London-listed venture between the Bakries and financier Nat Rothschild, rose as much as 6 percent on Thursday. The stock's sharp fall, a drop of 33% since the end of June, had triggered the mandatory repayment of the one-year US$1.35 billion loan that had been due to mature in March 2012.
Jakarta-listed PT Bumi Resources Tbk, Asia's largest thermal coal exporter, jumped as much as 5.8 percent on hopes the two sides were closing in on a deal.
Glencore will have the option of turning the loan into an equity stake in Bumi Plc, which at current prices has a market capitalisation of US$2 billion, if Bakrie cannot repay the debt, one source said. The sources declined to be identified because the negotiations are private.
The marketing rights could be extended to other Bakrie non-coal assets, such as zinc and copper from PT Bumi Resources Minerals Tbk (BRMS), another Bakrie-controlled company, one of the sources said. Several Glencore executives are in Jakarta to help close the deal, which one source familiar with the situation said could be announced as early as Friday.
Glencore has been tipped as a frontrunner since news of the refinancing talks emerged last week, due to its existing relationship with the Bakrie family and coal marketing deals.
But the Bakrie family is also holding talks with other potential backers, including trader Vitol S.A., which since its entry into the coal market in 2005 has been keen to find sizeable, high-quality mines and has already signed long-term offtake deals with Indonesian producers including Bayan Resources (BYAN).
The two trading houses are holding separate talks, two of the sources said, adding Vitol -- whose negotiations are being led by a former senior Glencore coal executive -- was fighting hard to secure the deal even as its rival appeared to close in on the prize.
Disclosure: No position at the stock mentioned above.
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