Bumi proposes debt-to-equity conversion

IDX-listed coal giant PT Bumi Resources Tbk proposed a debt-to-equity conversion as part of a debt settlement mechanism unveiled during a meeting Monday with creditors at the Central Jakarta Commercial Court, Kontan reported.

The paper said that Bumi proposed that its debt to key creditor China Investment Corp to be converted into a 9.63 percent shares in the company, 45 percent stake in subsidiary PT Pendopo Energi Batubara, and 40 percent stake in subsidiary PT Dairi Prima Minerals. Bumi also proposed its debt to Castleford Investment Holding Ltd to be converted into shares in the coal mining company.

Meanwhile, debts owed to China Development Bank will be settled through a number of measures including converting part of it into shares in Pendopo Energi, issuing new senior secured facility Tranche A and Tranche B, and so-called contingent value rights (VCR) mechanism, under which Bumi will repay about US$100 million debt in two tranches.

Bumi, which owes a combined $7.29 billion, also offered extension of payment period of up to two years to other creditors.

As has been previously reported, Bumi, which has been hurt by the current drop in coal price, was taken to court in April by Castleford, which filed a debt postponement petition (locally known as PKPU). Despite the petition, continues to seek an out of court debt settlement with Castleford and other creditors. Bumi said that the case has not affected its mining operation.

Under a PKPU, a company will be given an opportunity to propose a debt settlement to all of its creditors, a restructuring process supervised by the court. If the company fails to obtain creditors' approval for the debt settlement proposal, the court will declare the company bankrupt.(*)