PT Bumi Resources expects to reach an agreement with creditors to restructure $375 million of convertible bonds this week after the notes’ original due date passed Aug. 5.
“We expect a resolution this week and will inform the market as soon as possible,” Jakarta-based director Dileep Srivastava said in an e-mail today, declining to elaborate.
Asia’s most indebted coal mining company has an Aug. 12 deadline to either repay or restructure the 9.25 percent notes. It sent a sweetened debt-exchange offer to bondholders last month after an initial proposal failed at a June 20 meeting in Singapore. A default would be Indonesia’s largest since PT Bakrie Telecom missed a payment on $380 million of bonds in December, according to Bloomberg-compiled data.
Bumi, in a letter to bondholders last month, a copy of which was obtained by Bloomberg News, is proposing the $375 million of notes be split into two tranches. Tranche one would include $225 million of debt due April 2018 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.
‘Game of Chicken’
“There’s always this game of chicken which goes on in these scenarios,” Rohit Gadkar, an emerging-markets money manager at Trea Capital Partners SV in Barcelona, said via e-mail yesterday. “I don’t think it’s in anyone’s interest to have a default.” Gadkar’s fund used to own the convertible notes.
Bumi’s $700 million of 10.75 percent notes due October 2017 dropped 0.03 cents to 45.733 cents on the dollar as of 2:12 p.m. in Hong Kong, poised for a fourth day of declines, Bloomberg-compiled prices show. They’ve lost 22.6 percent this year. The convertibles last traded at 40 cents on the dollar Aug. 5.
Bumi, a Bakrie family-controlled group, faces more than $1 billion of obligations over the coming 18 months, including the convertibles and a first semi-annual payment of $150 million on a loan from China Development Bank Corp. that was due Aug. 6, Moody’s Investors Service said on Aug. 1.
Without new financing, Bumi will need to sell some of its mining assets or get lenders to modify debt maturities, Moody’s Singapore-based analyst Brian Grieser said in the report.
The company has held talks with some bondholders about the sweetened terms, according to its letter, including a committee representing investors Nan Fung Investment Advisors Ltd. and funds managed by Pine River Capital Management LP and JPMorgan Chase & Co.
James Banghart, a Hong Kong-based managing director overseeing international convertible bonds at JPMorgan, declined to comment on the negotiations when contacted by phone today.