Aug. 29 (Bloomberg) -- Bumi Plc, the coal producer at the center of an ownership dispute, said it can’t guarantee that Indonesia’s Bakrie Group can fund a planned $501 million exit from the London-listed company.
“I don’t have any guarantees for you on that,” Chief Executive Officer Nick von Schirnding told reporters today on a conference call from London. “I can’t speak for the Bakrie financing,” he said, adding that the two parties are working on a revised arrangement to have funds placed in escrow before a planned shareholder vote on the deal this year.
For 18 months Bumi has been at the heart of a battle for control between the Bakries and Nathaniel Rothschild, 42, scion of a centuries-old British banking dynasty, as waning coal prices, board infighting and probes in the U.K. and Indonesia weighed on the stock. The shares plunged 69 percent last year as each made rival proposals to unwind the $3 billion deal that brought them together in 2010.
Bumi, owner of stakes in two Indonesian coal suppliers, last month agreed to sell its 29.2 percent stake in PT Bumi Resources to the Bakrie Group as part of a two-step plan to separate from one of Indonesia’s wealthiest families. Bumi Chairman Samin Tan has agreed to buy the Bakries’ 23.8 percent holding in Bumi Plc for $223 million.
The timing of a completed separation is “highly uncertain,” JPMorgan Cazenove analyst Fraser Jamieson wrote in a report today. “We remain very cautious on Bumi ahead of finalization of the separation agreement with the Bakrie Group.”
A formal document outlining the plan will be submitted to regulators in the U.K., including the Takeover Panel, before being sent to investors next month, von Schirnding said today.
The Bakries said in June they had the full amount available. A spokesman couldn’t immediately be reached for comment today. The separation was first announced in October before being revised.
“There is no plan B and so we think this is the best deal that we have on the table,” von Schirnding said. “We would hope that shareholders support this and allow us to then move to the next stage which is really a focused coal mining company with a significant amount of cash.”
Separately, von Schirnding said the company was still working to recover the majority of $201 million in missing assets at unit PT Berau Coal Energy. In June, Bumi said it had struck a deal with former company director Rosan Roeslani to get back most of the money. The company has yet to recover any of the missing funds, von Schirnding said.
“It’s a mixture of assets and cash that we are looking at,” he said. “This is an agreement that was signed by both parties and we’re making progress certainly on the assets in the very near term and hope to announce progress on that over the next few weeks.”
Bumi swung to an underlying loss in the first half after prices for power-station coal declined. The loss was $45 million, compared with a $7 million profit a year earlier, the company said today in a statement.
The stock gained 1.6 percent to close at 214.1 pence in London trading, valuing the company at 516 million pounds ($799 million).
Bumi plans a “substantial” cash return to investors from the proposed sale of its PT Bumi stake to the Bakries for $501 million, it said last month. Rothschild, who owns a 14.8 percent stake in Bumi, has criticized the handling of the separation from the Bakries and repeatedly called for Chairman Tan to resign.
“Bumi remains an interesting self-help story,” Liberum Capital Ltd. analyst Richard Knights wrote today in a note. The coal producer could pay about $400 million to investors from the Bumi Resources stake sale and still have enough cash to pay down debt, he said.
Net debt fell to $389 million from $514 million at Dec. 31, Bumi said. Production at Berau for the half-year rose 19 percent to 11.5 million metric tons and the company expects output of 23 million tons this year, it said.
The near-term outlook for thermal coal prices “remains challenging,” Bumi said. The company’s average sale price was $61.40 a ton, down from $76.60 a year earlier, it said. Costs fell 10 percent to $37.10 a ton.
Bumi said it has appointed Paul Fenby as chief financial officer and Keith Downham as chief mining officer, with both men based in Jakarta.
“If you look at the coal environment today it is very challenging,” von Schirnding said today. “The sector is under huge pressure. We’re under huge pressure.”
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