PT Bumi Resources (BUMI) is “highly likely” to miss payment on $375 million of convertible bonds in August if holders don’t agree to a proposal to delay the debt’s maturity, it said in a memorandum to noteholders.
The Indonesian coal miner is seeking consent to amend the terms of the bonds, including extending the debt’s maturity to July 2021 from Aug. 5 and cutting the annual coupon to 7 percent from 9.25 percent, according to a June 5 consent solicitation memorandum obtained by Bloomberg News. It hasn’t paid the coupon that came due on June 5, the document shows.
“The delay in bond maturity will give them some breathing space to repay bondholders,” Amit Jain, a credit analyst in Bangalore at SJS Markets Ltd. said by phone. “The trouble is, they’re already finding it difficult to pay some bond coupons” and there will continue to be “liquidity pressure without any recovery in coal prices,” he said.
The bond restructuring represents another obstacle to the miner that’s trying to ease its financial burden after coal prices extended a two-year slump to the lowest level since 2009. The group is negotiating with lenders including Deutsche Bank AG and China Development Bank Corp. to help ease $4.7 billion of short-term liabilities.
Dileep Srivastava, a Bumi director in Jakarta, declined to comment on the contents of the memorandum when reached by phone today.
The convertible notes were little changed at 38.653 cents on the dollar as of 6 p.m. in Hong Kong after earlier falling 3.3 cents, according to Bloomberg-compiled prices. They’ve lost 30 percent this year through yesterday, while the stock has slumped 35 percent in Jakarta over the same period.
Bumi, controlled by Indonesia’s Bakrie family, posted losses in the past two years as benchmark coal prices in the Southeast Asian nation slid 8.4 percent this year through last month to the lowest level since 2009. It avoided a default yesterday by paying an overdue 12 percent coupon on its $300 million November 2016 bonds, according to a filing to the Indonesian stock exchange.
The group 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 statement last month. That comes after the completion of a $501 million breakup in March from a venture with U.K. financier Nathaniel Rothschild.
Lenders have consented to a plan to reorganize its debt with China Investment Corp., Srivastava said in the exchange filing yesterday. Bumi has a $600 million credit line with China Development Bank, and a combined $542.5 million of facilities with Axis Bank Ltd., Deutsche Bank, Credit Suisse Group AG, WestLB AG and UBS AG, according to the June 5 memorandum.
Among proposed changes to its convertible debt, Bumi is also seeking to change the conversion price of stock to 750 rupiah per share ($0.06) from 3,366.9 rupiah, the document shows. Bumi is also planning to reduce the amount of convertible notes outstanding to $250 million, via an option that requires mandatory conversion into shares from a rights offering, it said.
Holders of the convertible bonds have until June 18 to give their consent to the amendments, according to the company. The resolution will require at least 75 percent of votes cast at a bondholders meeting to be held on June 20 in Singapore, according to the document.
Standard & Poor’s ranks Bumi’s debt at CC, a level that’s deemed highly vulnerable to non-payment and two steps away from outright default. It said in October there was a realistic possibility of a conventional default within 12 months.
As Bumi reorganizes, other parts of the Bakrie group are also facing financial strain. Fitch Ratings Ltd. cut PT Bakrie Telecom to ‘restricted default’ on May 30. The phone operator in December defaulted on a coupon payment on $380 million of 11.5 percent notes due May 2015, Fitch said.