Moody's downgrades Bumi Resources' ratings to B3
Saturday, June 8 2013 - 02:07 AM WIB
Moody's has also placed the ratings on review for further downgrade.
The senior secured bonds are issued by Bumi Capital Pte Ltd and Bumi Investment Pte Ltd, both of which are wholly owned subsidiaries of Bumi Resources.
"The downgrade reflects our concern about Bumi's ability to refinance its upcoming debt maturities in a timely manner, given the delays in the separation of Bumi Resources from Bumi Plc and the stoppage of work by a mining contractor at the Arutmin mine since late April," says Simon Wong, a Moody's Vice President and Senior Analyst and the Lead Analyst for Bumi Resources.
In February 2013, Bumi Plc signed an agreement to divest its entire 29.2% stake in Bumi Resources to Bakrie Group. The transaction, initially proposed in October 2012 by Bakrie Group, is still pending the approval of Bumi Plc's shareholders.
The uncertainty over Bumi Resources' shareholding structure has in turn delayed the refinancing of its upcoming debt maturities in Q3 2013.
Moody's review will focus on Bumi Resources' ability to: (1) refinance its scheduled near-term maturities, particularly its $150 million loan due in August; (2) reduce its debt level through asset sales; and (3) restart operations at the Senakin and Satui mines as soon as possible and avoid a material adverse impact on its full-year production target and operating cash flow.
Moody's would downgrade the ratings further, if Bumi Resources is unable to refinance its maturity due in August by the end of June.
Bumi Resources had consolidated debt of $4.28 billion at end-2012. It will need to refinance $634 million of this debt which will be due over the next 12 months.
In addition to the maturity due in August, $406 million of loans at Bumi Resources Minerals (BRM, unrated) -- in which the company has an 87.09% stake -- will mature in September. The debt at BRM is non-recourse to Bumi Resources. Bumi Resources had cash on hand of $45.1 million and $100 million in restricted cash in banks at end-2012.
Furthermore, Bumi Resources' liquidity risk is very high at the holding company level, given the structural separation from the underlying coal assets which are the major contributors to the group's cash flow. Also, the group's ability to generate free cash flow will be limited because of weak coal prices.
The principal methodology used in these ratings was the Global Mining Industry Methodology published in May 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
Bumi Resources is Indonesia's largest thermal coal producer and one of the three largest thermal coal exporters globally. Through its principal assets (a 65% stake in PT Kaltim Prima Coal and a 70% stake in PT Arutmin), Bumi produced 66 million tons of coal in 2011 and which accounted for approximately 19% of Indonesia's total coal production.
Its non-coal resource holding company, Bumi Resources Minerals, was listed on the Indonesian Stock Exchange on 9 December 2010. Bumi Resources currently owns 87.09% of Bumi Resources Minerals.
Bumi Plc, previously known as Vallar Plc, currently has a 29.2% stake in Bumi Resources. (ends)