PT Bakrie & Brothers (BNBR), the Indonesian family palm oil-to-property empire founded in 1942, needs to raise about $100 million in cash by the end of this week as loan collateral, a person familiar with the matter said.
The value of collateral fell below 1.2 times the amount of the loan on April 20, triggering a rule that it must be increased to 1.54 times, said the person, who asked not to be identified because the details are private. The $437 million loan is backed by a stake in Bumi Plc, a London-listed coal mining company whose shares have slumped 29 percent in the past month. It dropped 8.5 percent yesterday to a record low.
Bumi, founded by Nathaniel Rothschild in 2010 as investment vehicle Vallar Plc, has halved in value since the 2010 initial public offering that raised 707.2 million pounds ($1.14 billion).
“There’s no doubt they will be able to come up with a solution of either refinancing, selling the stake or selling it with a call option to buy it back,” Richard Knights, a London- based mining analyst at Liberum Capital Ltd. who recommends investors buy the stock, said by phone. “There’s multiple options for them.” The Bumi share slump is “an overreaction. It’s not a fundamental concern, it’s a technically driven issue,” he said.
PT Borneo Sale
The Bakries have until the end of the week to place the cash with Credit Suisse Group AG, the loan’s facility agent, the person said. The Bakries sold half of their 47.6 percent stake in Bumi for $1 billion in cash to PT Borneo Lumbung Energi & Metal in January to help repay a loan to Credit Suisse.
Adam Bradbery, a spokesman for the Swiss bank in London, declined to comment.
Eddy Soeparno, Bakrie & Brothers’ finance director, declined to comment on whether the company had received notice from banks about the covenant and the need for additional collateral when reached by telephone in Jakarta yesterday. Soeparno earlier denied receiving a default notice from creditors, as reported by the Financial Times.
Bumi fell to 497.4 pence in London trading yesterday. That’s the lowest since the 2010 Vallar IPO, when shares were sold at 1,000 pence apiece. Jakarta-listed Bumi Resources, which declined 7.44 percent yesterday, rose 0.5 percent to 2,000 rupiah (22 U.S. cents) as of 11:59 a.m. local time.
S&P refrained from joining Moody’s Investors Service and Fitch Ratings in upgrading Indonesia to investment grade, citing “policy slippages” in a statement yesterday. The decision wasn’t expected by the central bank, Perry Warjiyo, director for economic and monetary policy research at the monetary authority, said yesterday. S&P affirmed the rating on Indonesia’s sovereign debt at BB+, with a positive outlook, it said in the statement.
Non-investment grade bonds are rated below Baa3 by Moody’s and lower than BBB- by S&P.
Investors are concerned the Bakrie family may pledge shares in Bumi and other companies to top up collateral on its debt, Herman Koeswanto, an analyst at PT Mandiri Sekuritas in Jakarta, said in a phone interview. Still, investors are overreacting, he said.
Samin Tan, president director of Indonesian coal supplier PT Borneo, was appointed chairman of Bumi Plc (BUMI) last month after Rothschild stepped down as co-chairman. Ari Hudaya, chief executive, was replaced by Nalin Rathod.