- Miner says it's able to sustain less than half its debt load
- Bonds sink to new low as commodities rout roils markets
A new restructuring plan from PT Bumi Resources failed to stop Asia’s most-indebted coal miner’s bonds sinking to a record low Tuesday.
The proposal seeks to convert $1.5 billion of loans and bonds into a 32.5 percent equity stake in the Jakarta-based company, according to a stock exchange filing late Monday. It will also require sovereign wealth fund China Investment Corp. and China Development Bank to swap $780 million of debt with shares in Bumi and unlisted units. Some $410 million of convertible notes will turn into stock after five years, under the plan.
Bumi chose a torrid time to seek a reprieve from lenders as markets punish firms from Glencore Plc to Noble Group Ltd. amid a global commodities rout. The Indonesian miner said it can only sustain less than half of its $4 billion debt load as coal prices, which tumbled 54 percent in the four years through 2014, sank further to $55.45 on Monday.
“Coal demand could slow further as coal consumption is being replaced by more clean energy,” said Helen Lau, a mining analyst in Hong Kong at Argonaut Securities (Asia) Ltd. “We expect coal supply to shrink further as more companies cut production or shut mines. For creditors, some deep haircuts cannot be avoided.”
Bumi’s 2016 dollar notes earlier traded down 0.5 cents at a record-low 18.525 cents on the dollar in Hong Kong, according to prices compiled by Bloomberg, and were little changed at 19.017 cents as of 4:20 p.m. Its 2017 notes fell to the same price, also an all-time low. They were both sold to investors at par, or 100 cents on the dollar.
Bumi aims to garner feedback and consent from creditors by Oct. 22, and wants to implement the plan under Indonesian restructuring law. The revised debt terms came before a moratorium from a Singapore court expires on Oct. 24. Last December, three Bumi units in Singapore, which have $1.375 billion of dollar-denominated debt outstanding, filed for Chapter 15 court protection in the U.S. to fend off creditors.
Bumi plans to hold bondholder meetings next week in London and the following week in Asia with parties including Chinese creditors, a person familiar with the matter said today, asking not to be identified because the details are private.
The Bakrie group, which controls Bumi Resources, also defaulted on notes issued by PT Bakrieland and PT Bakrie Telecom in 2013, according to data compiled by Bloomberg. This year, Chinese coking-coal importer Winsway Enterprises Holdings Ltd. defaulted on $309 million of bonds, and Jakarta-based PT Berau Coal Energy is embroiled in a $950 million debt restructure with bondholders.
Bumi units skipped a semi-annual coupon payment on $700 million of 10.75 percent 2017 notes in November following a 30-day grace period, prompting Standard & Poor’s and Moody’s Investors Service to declare a default. It also missed an interest payment on $300 million of 12 percent 2016 securities in December.