PT Bumi Resources (BUMI) avoided a default by paying an overdue coupon on its $300 million November 2016 bonds, according to a filing to the Indonesian stock exchange.
“The outstanding coupon has been paid today within the cure period,” director Dileep Srivastava said in the statement, which came after the exchange halted trade in Bumi’s stock and sought information on the payment’s status.
The 12 percent notes jumped 2.6 cents to 47.29 cents on the dollar as of 1:05 p.m. in Hong Kong, Bloomberg-compiled prices show, set for the biggest one-day gain since May 16 and the highest level since May 2. They’ve returned 20 percent since the coal producer sought a 30-day grace period to make the interest payment.
Jakarta-based Bumi had until today to make the twice-a-year coupon payment after delaying by a month while it negotiated with creditors and lenders to ease its cash strain. The company, which had $4.72 billion of short-term liabilities at the end of 2013, on June 6 asked bondholders for permission to extend the maturity on $375 million of convertible notes that are coming due in August.
Investors are watching Bumi’s refinancing plan amid concern non-payments among Asia’s riskiest borrowers will rise as a slowdown hits some regional miners and property developers. Moody’s Investors Service expects speculative-grade defaults in the region outside Japan will climb to 2.9 percent in 2014 from 2.1 percent in 2013, according to a June 6 report.
Bumi still has “pretty sizeable maturities beyond the convertible bonds, so refinancing risk will remain high,” said Xavier Jean, a credit analyst at Standard & Poor’s in Singapore. “It seems pretty challenging unless they execute their planned large equity raising, or sell assets.”
Bumi, controlled by Indonesia’s Bakrie family, posted losses in the past two years amid a slump in coal prices. Benchmark prices in the Southeast Asian nation have dropped 8.4 percent since Dec. 31, extending a two-year slide to the lowest level since 2009.
“The main underlying issue is the low coal prices,” Amit Jain, a credit analyst in Bangalore at SJS Markets Ltd., said in an e-mail today. “The company cannot sustain the current debt load. Coal producers are just looking to survive and wait for prices to improve.”
Bumi has called a meeting on June 20 in Singapore to seek consent from its convertible note bondholders to extend the maturity of the 9.25 percent debt to 2021, consent solicitation agent Deutsche Bank AG said earlier this week. Other terms haven’t been publicly disclosed.
Rohit Gadkar, an emerging markets money manager at Trea Capital Partners SV in Barcelona, sold his holding in Bumi’s convertible bonds earlier this year because information on the company’s situation was hard to come by.
“I felt you’re taking a complete punt based on hope, and that type of trade doesn’t fit into my strategy,” Gadkar said in an e-mail interview June 6. “There’s not enough transparency. I may revisit this once there is more clarity.”
Bumi’s refinancing plans also entail selling as many as 26.17 billion of new shares to repay $1.3 billion to China Investment Corp., according to a May statement. That comes after the completion of a $501 million breakup in March from a venture with U.K. financier Nathaniel Rothschild.
Srivastava, in today’s exchange filing, said Bumi has won consent from lenders for the China Investment Corp. deal.
Shares in Bumi closed yesterday at 194 rupiah ($0.02), up 2.65 percent. The stock has fallen 35 percent this year.
To contact the editors responsible for this story: Katrina Nicholas at email@example.com Andrew Monahan