PT Bumi Resources, the most indebted coal producer in Asia, is trying to sweeten its debt-exchange offer, sending a letter to holders of its $375 million bonds ahead of a repayment deadline next week.
The Jakarta-based coal-mining group, which risks default if it doesn’t pay on Aug. 5, is offering convertible bondholders new terms that include repaying the debt in April 2018, three years sooner than its initial June 5 proposal, which wasn’t successful at a creditors meeting June 20. It’s also considering splitting the 9.25 percent debt into convertible and straight debentures, and paying a coupon on the latter of 8.5 percent, according to the letter, a copy of which was obtained by Bloomberg News. The June 5 proposal was offering a revised 7 percent coupon.
The sweetened offer may help Bumi secure a default waiver as it seeks to manage $4.7 billion of short-term liabilities at the end of 2013. The June 20 bondholders meeting in Singapore to vote on the first note restructuring plan and waiver failed because it didn’t achieve a quorum. Two other companies linked to Indonesia’s Bakrie family have missed payments on $535 million of dollar bonds since March 2013.
Andrew Beckham, Bumi’s Jakarta-based chief financial officer, declined to comment on the new terms when contacted by e-mail and phone yesterday. Dileep Srivastava, another company director, also declined to comment when contacted by e-mail.
Bumi has held talks with some bondholders about the new terms, according to the letter. They include an ad-hoc committee representing investors Nan Fung Investment Advisors Ltd. and Vervain Income Investment Ltd., as well as funds managed by Pine River Capital Management LP and JPMorgan Chase & Co.
Nan Fung and Vervain declined to comment on the situation in an e-mail reply to Bloomberg News.
No agreement has been reached, and the latest proposed terms are still subject to discussion and may be adjusted slightly again, people familiar with the matter said, asking not to be identified because the matter is private.
The convertible notes, sold by Bumi unit Enercoal Resources Pte in 2009, gained 0.21 cents to 40 cents on the dollar as of 12:04 p.m. in Hong Kong, according to Bloomberg-compiled prices. They returned 14.3 percent in July, ending a six-month slide, and are down 25.6 percent since Dec. 31.
Under the latest proposal, the $375 million of bonds would be split into two tranches, one of which would include amended economic and conversion features and the other of which would be restructured as straight debt, according to the letter. Both tranches would share in the common security package on equal basis with Bumi’s other senior secured creditors, who have already consented to such treatment, the letter said.
Tranche one would include $225 million of April 2018 debt paying a 6 percent coupon and convertible into Bumi shares at 300 rupiah ($0.03) each after Aug. 5, 2015. Tranche two would comprise $150 million of April 2018, 8.5 percent straight debt, yielding 9.25 percent.
In the initial June 5 offer to bondholders, Bumi sought to exchange the existing 9.25 percent bonds with new 7 percent convertible notes due July 2021. The stock conversion price for them was to be cut to 750 rupiah from 3,366.9 rupiah.
Bumi’s shares are down 37 percent this year. The stock last traded at 189 rupiah July 25, after which markets in Indonesia closed for a week-long holiday. The Jakarta Composite Index is up 19 percent in 2014.
Benchmark coal prices in the Southeast Asian nation have fallen 9.8 percent this year to $72.45 a metric ton on July 31, extending a two-year slump to the lowest since November 2009.
Bumi, 29.2 percent-owned by the Bakrie group, warned in June that it’s “highly likely” to default if bondholders don’t consent to a restructuring. In December, PT Bakrie Telecom missed a coupon on $380 million of 2015 notes, while PT Bakrieland Development didn’t make a put option payment on $155 million of 2015 convertible debt in March 2013.
Bumi shareholders on June 30 passed a resolution allowing the company to raise 8.05 trillion rupiah by Sept. 1 via the sale of 32.2 billion new shares at 250 rupiah apiece, the company said on July 1.
Standard & Poor’s upgraded Bumi to CC from selective default on July 7, after the mining company completed a separate deal with creditors including China Investment Corp. Bumi is still at risk of being downgraded because S&P deems the convertible bond restructuring as a distressed exchange, the ratings company said.