Bumi Resources Plans $665 Million Rights Offer to Repay Debt

PT Bumi Resources plans to raise $665 million in a rights offering to repay debt to China Investment Corp. and for bonds due in August, in its latest effort to stave off the prospect of default.

The company will hold a shareholders meeting on June 30 to seek approval to sell as many as 32.2 billion new shares at 250 rupiah each, it said in a statement to the Jakarta stock exchange late yesterday. Out of the proceeds, $600 million will be for repaying debts, including $150 million to both the Chinese sovereign wealth fund and the bond repayment, it said.

The Bakrie group, which part-owns Bumi Resources, is seeking to avert a third default in 16 months as coal prices extend a two-year slump and rising interest rates dent profits. The company, part of a failed venture between the Bakries and U.K. financier Nathaniel Rothschild, hasn’t been able to extend the maturity of $375 million of convertible bonds due in August.

“The rights offer temporarily helps” to avoid default, Ikhsan Binarto, an analyst at PT Indo Premier Securities in Jakarta, said by telephone today. “Even if it manages to settle its problems, Bumi will require a revamp of its management to regain investors’ trust.”

Bumi’s stock rose 13 percent to 169 rupiah, extending gains to a second day. The shares have fallen 50 percent this year as of yesterday on debt concerns. The Jakarta Stock Exchange Mining Index has gained 3.7 percent in the same period.

The company will use $150 million to repay part of guaranteed convertible bonds due Aug. 2014, it said. The company paid a June coupon and is “up to date” on its obligations, Company Director Dileep Srivastava said on June 23, after the company missed a payment on the notes earlier in the month and warned it was “highly likely” to default without forbearance from debt holders. The 9.25 percent notes mature Aug. 5, Bloomberg-compiled data show.

For every 20 shares owned, investors will have the right to buy 31 new shares in the offering, the company said. The proceeds would also be used to fund exploration by unit Gallo Oil and a copper and gold concession feasibility study for PT Gorontalo Minerals.

Before it's here, it's on the Bloomberg Terminal.