Moody's downgrades Bumi Resources to Ca

(Singapore, October 10, 2013) -- Moody's Investors Service (Moody's) has downgraded PT Bumi Resources Tbk's (Bumi Resources) corporate family rating to Ca from Caa1, thereby concluding its review initiated on July 22, 2013. Moody's has also downgraded to Ca the ratings on its $300 million senior secured notes issued under Bumi Capital Pte. Ltd., and the $700 million senior secured notes issued under Bumi Investment Pte. Ltd. Both entities are wholly owned subsidiaries of Bumi Resources.

The rating action reflects the high probability of near-term default for the thermal coal producer given its substantial upcoming debt maturities. As a result of its high leverage and weak liquidity, the company's recent announcement of an agreement with China Investment Corporation (CIC) to restructure $1.3 billion of outstanding indebtedness, largely through a debt-for-equity exchange, will be viewed as a distressed exchange under Moody's definition of default.

"While Moody's expects the planned exchange to result in an immediate improvement in Bumi Resources' capital structure and a significant reduction in its interest burden, we believe it will only provide short-term relief, with further material debt maturities scheduled in 2014", says Brian Grieser, a Moody's Vice President -- Senior Analyst.

"We also believe that -- in the absence of new bank or bond proceeds - Bumi Resources would only be able to address these maturities with additional asset sales, which would in turn further reduce available cash flows to existing bond holders from its two main coal mines, KPC and Arutmin," adds Grieser, who is also the lead analyst for Bumi Resources.

After excluding CIC's debt, Bumi Resources will need to refinance over $800 million of maturities over the next 12 months, a task which could prove challenging, given the current pressure on its operations due to low coal prices and the reduction in cash flow following its sale of a 19% stake in KPC -- its largest coal mine -- to CIC.

The agreement will exchange the existing debt into 42% of Bumi Resources' holding in Bumi Resource Minerals (BRMS); 19% of its holdings in each of KPC, Indocoal Resources and PT Indocoal Kaltim Resources; up to $150 million new shares in Bumi Resources; and $400 million in residual loans.

The transaction is subject to regulatory approval as well as lender approval. The 19% interests in the coal assets are pledged as security in the common security documents.

The principal methodology used in this rating 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 before the exchange and a 70% stake in PT Arutmin), Bumi Resources produced 73 million tons of coal in 2012 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 (before the exchange).

Bumi Plc, previously known as Vallar Plc, currently has a 29.2% stake in Bumi Resources. (ends)