Renaissance struggles to keep $3.2bln coal deal alive: Report

Indonesian bank Renaissance Capital is struggling to seal its $3.2 billion coal mine deal with Bumi Resources as foreign creditors, alarmed by poor performance of one of the mines, want to cut lending for the deal.

Under the previous plan, foreign banks would lend $2.1 billion to help fund what would become Indonesia's second-largest acquisition. The rest would be financed by equity, including $700 million in an exchangeable bond arranged by a Singaporean bank.

But creditors are baulking after one of the two mines which Renaissance is buying performed far worse than expected in the second quarter, sources familiar with the matter told Reuters.

"The weaker (production) numbers are causing investors to be more conservative," said one source. "Creditors are asking for lower portion of debt financing."

That's leaving few choices for Renaissance if it wants to move ahead with its acquisition, which is already about one month behind schedule.

It can bring in more lenders or investors, but such a chance does not appear high especially given that Renaissance has not found any strategic investors yet, said people familiar with the matter. Renaissance is funding the equity portion largely with a convertible bond, they noted.

Renaissance has tried to lower the acquisition price, but Bumi is unwilling to do so because it views the problem at the mine, PT Arutmin Indonesia, as a one-off, sources said. It was caused by unusually heavy rains in the second quarter, they said.

The other mine Bumi is selling, PT Kaltim Prima Coal (KPC), Indonesia's largest coal producer and exporter, operated normally, one source said. KPC and Arutmin together accounted for 37 percent of Indonesia's 2005 coal exports.

Bumi -- controlled by the family of Indonesia's Chief Social Welfare Minister Aburizal Bakrie -- also believes its shareholders would not accept a price cut, especially after coal prices have strengthened over the last few months, they added.

Another source said Renaissance's acquisition plan was facing high hurdles, although it was premature to say the deal would definitely fall apart. The source declined to elaborate.

Earlier this month, sources told Reuters that Bumi had already started looking for new buyers.

"Bumi has lost patience with Renaissance," one source said on Monday.

Bumi needs the proceeds from the mine sale to bankroll the mostly undeveloped oil and gas blocks of sister company PT Energi Mega Persada Tbk . Bumi plans to take over the oil explorer in an all-stock bid worth around $1.2 billion, and the merger would be voted at a shareholders' meeting on Sept. 19.

Renaissance chief Samin Tan was not available for comment on Monday. Spokespeople at Credit Suisse, which is arranging the Renaissance fund-raising and advised the bank on the acquisition, and JPMorgan, which advised Bumi on the coal mine sale, have declined to comment. (*)