Bumi Resources Gets Five-Month Extension of Debt Moratorium

Updated on

PT Bumi Resources, Asia’s most-indebted coal miner, obtained a five-month extension of a debt moratorium, allowing it to fend off creditors after it defaulted on two of its dollar bonds last year.

The extra time granted by a Singapore court on Thursday will end on Oct. 24, Chris Fong, a Jakarta-based spokesman for the group, said in a phone interview. He declined to disclose details of the debt workout, saying more time is needed to complete the process.

The extension came before an initial six-month freeze on creditor actions expires Sunday. Three Bumi units in Singapore, which have $1.375 billion of dollar-denominated debt outstanding, in December filed for Chapter 15 court protection in the U.S., each listing assets and debt of as much as $1 billion.

A slump in the coal market has depressed producers from Indonesia to China and the U.S., contributing to some of the 58 defaults in 2014, according to Standard & Poor’s. Earlier this month, Chinese coking-coal importer Winsway Enterprises Holdings Ltd. defaulted on $309 million of bonds while PT Berau Coal Energy is seeking to extend the maturity on $950 million of debentures.

“The coal industry is still going through a consolidation and shutdown phase, so coal assets will not get a good price with thin merger and acquisition flow,” Helen Lau, a mining analyst in Hong Kong at Argonaut Securities (Asia) Ltd., said. “Any recovery in demand this year is going to be weak and highly leveraged companies will still struggle to revive earnings.”

‘Sustainable Levels’

Coal prices tumbled 54 percent to $62.30 per metric ton in the four years through 2014, and have fallen further to $55.80 as of May 21, according to futures contracts for the commodity at Newcastle port in Australia. Bumi shares rose as much 9.1 percent in intraday trade to 96 rupiah in Jakarta on Friday.

The objective is “to bring down debt to sustainable levels as early as possible,” Bumi said in a stock exchange filing on Jan. 21. The company is ready for the next upturn in the coal market, whenever this takes place, it said. Its capital reorganization may include asset sales to repay creditors, a separate filing shows.

Bumi skipped a semi-annual coupon payment on its $700 million of 10.75 percent 2017 notes in November following a 30-day grace period, prompting S&P and Moody’s Investors Service to declare a default. It also missed an interest payment on $300 million of 12 percent 2016 notes in December.

Convertible Bonds

The 2016 debentures rose from a three-month low, adding 0.8 cents to 28.34 cents on the dollar as of 3:44 p.m. in Hong Kong on Friday, according to prices compiled by Bloomberg. The 2017 notes fell 0.7 cents to a three-month low of 28.34 cents. Both securities fell to record lows of less than 20 cents in January. They were sold at par, or 100 cents on the dollar.

Bumi Resources restructured $375 million of convertible bonds in August by extending their maturity, after selling stakes in some coal-producing units to China Investment Corp. to pare debt. The Bakrie group, which controls Bumi, also defaulted on notes issued by PT Bakrieland and PT Bakrie Telecom, according to Bloomberg data.

At Bumi Resources, current liabilities exceeded assets by $4.63 billion as at the end of September, it said in an interim report in January. It’s also defaulted on some loan agreements as a result of non-payment to bondholders.

Bondholders formed an ad-hoc group on Dec. 3 to discuss a “comprehensive capital structure solution” with the company, the group’s financial adviser Houlihan Lokey Inc. said. It also named Kirkland & Ellis LLP as a legal adviser.

Bakries Say ‘No Easy Fixes’ to Bumi Default Until Coal Rebounds