Nov 11, 2011

Where Bumi puts its money?

Nathaniel Rothschild, one of shareholders at London-based company Bumi Plc with 11% stake, has officially sent a letter and called a radical clean-up in PT Bumi Resources Tbk (BUMI).
He also questioned Bumi Resources why the company not to call its loan to companies, including PT Recapital Asset Management. Where Bumi Resources actually puts its money?
Referring to Bumi Resources's June financial report, page 75, the company and Recapital Management,  On August 27, 2008, entered into a discretionary fund contract for a period of 6 months and subject to extension as agreed by both parties. 
Based on this contract, Bumi Resources will give full  authority to Recapital as investment manager to carry out the management of Bumi Resources funds up to an amount of US$350 million.
On February 28, 2011, the agreement was extended until August 27, 2012.  On September 2, 2009, Bumi and Recapital entered into a second discretionary  fund contract for a period of 6 months and  subject to extension as agreed by both parties. 
Based on this contract, Bumi will give full  authority to Recapital as investment manager to  carry out the management of Bumi’s funds up to an amount of US$50 million. On  February 28, 2011, the agreement was extended until August 27, 2012. All short-term investments are with third parties. 
Check page 93, On November 2, 2009, Bumi also entered into a loan agreement with PT Bukit Mutiara, wherein the Company agreed to grant a loan facility with the principal amount up to US$300 million to
Bukit Mutiara in connection with a share sale and subscription agreement, which Bukit Mutiara is negotiating in relation to the acquisition of an indirect 90.0% interest in PT Berau Coal. The loan is unsecured and shall be repaid in full upon its maturity in 2015. The interest rate  of the loan is 12% per annum and is payable
every quarter
If Bumi calls the loan to Bukit Mutiara and investments at Recapital, Bumi Resources could obtain US$700 million plus returns and interest rate.
A local investment manager working at an asset management company said what Nat Rothschild's concern is related to the current situation of Bumi Resources.
Besides concern to Recapital, the investment manager asked why Bumi wants to propose shares buyback if he has to seek and finally obtain loan facilities for CIC's debt refinancing? Under current situation, he said Bumi is expected to focus on its debt payment and its operational business. 
"I don't understand why Bumi proposes shares buyback? Why don't they just focus on debt payment and operational performance?" the investment manager said.
Disclosure: No position at the stock mentioned above.

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