Moody's: Bumi Resources' distressed exchange with CIC is first step in balance sheet restructuring
Friday, July 4 2014 - 07:43 AM WIB
"The completion of this first step in the CIC debt-for-equity exchange is positive for Bumi in that it meaningfully reduces its highest interest debt after months of negotiations with lenders" says Brian Grieser, a Moody's Vice President and Senior Analyst.
"While this initial exchange is the first step in a much needed balance sheet restructuring, Bumi still has significant maturities in the near term that will need to be refinanced at time when its liquidity is weak and its balance sheet is over-leveraged" added Grieser.
Bumi will also exchange 42% of its holdings in PT Bumi Resources Minerals Tbk. (unrated) and $150 million of Bumi equity with CIC for a further reduction in debt. The residual loan to CIC following these exchanges will be $632 million and will bear interest at LIBOR plus 6.7%. No interest or principle will be payable in the first 12 months. This second part of the CIC debt-for-equity exchange is expected to close in September 2014. We estimate that Bumi's debt-to-EBITDA will be around 9.0x following these transactions, assuming no other reduction in debt.
Bumi has also been involved in negotiations with lenders under its $375 million convertible bonds due August 2014 in an effort to extend its maturity or restructure its terms. There has not been an agreement to date with convertible bondholders. In addition, Bumi's first installment on its China Development Bank loan, of $150 million, is due in August 2014. Given its cash position of $28 million at 31 March 2014, we expect this loan payment will also be required to be restructured.
Therefore, the ratings are unlikely to change until Bumi has successfully addressed its upcoming debt maturities. Upon completion of its balance sheet restructuring, we will reconsider our ratings on Bumi.
The CIC debt-for-equity settlement agreement was initially announced on October 9, 2013. At that time, Moody's commented that it views this exchange as a default that is part of Bumi's greater balance sheet restructuring.
Established in 1973 and listed on the Jakarta Stock Exchange in 1990, PT Bumi Resources (Bumi Resources) is Indonesia's largest thermal coal producer and one of the top three largest thermal coal exporters by tonnage globally. Through its principal assets -- now roughly 50% stake in PT Kaltim Prima Coal (KPC) and its 70% stake in PT Arutmin -- Bumi produced 82 million tons (mt) of coal in 2013. (ends)