Bumi Resources, a leading Indonesian coal mining company, came close to default on its USD $300 million November 2016 bond before paying an overdue coupon earlier this week. The company, which is in the hands of the controversial Bakrie family, is obliged to make two coupon payments per year but postponed payment due on 12 May 2014 in order to negotiate with its creditors and lenders. According to a statement of Bumi Resources Director Dileep Srivastava, the payment was done on 11 June 2014.
The bond (guaranteed senior secured notes) was issued by Bumi Capital Pte Ltd, an unit of Bumi Resources, in November 2009 with a coupon rate of 12 percent.
Despite the payment had been done, the Indonesia Stock Exchange still decided to suspend trading of Bumi Resources’ stocks during the first trading session on 12 June 2014 in order to verify the payment. Yesterday (11 June 2014) Bumi Resources stated that its lenders had agreed to close an USD $1.3 billion debt-to-equity swap with Chinese sovereign wealth fund China Investment Corporation (CIC). In this structure, CIC would acquire a 19 percent stake in Kaltim Prima Coal and a 42 percent stake in Bumi Resources Minerals. Both companies are subsidiaries of Bumi Resources.
Bumi Resources also plans to conduct a rights issue, with the aim to collect IDR 6.5 trillion (about USD $551 million) worth of funds, in order to settle its debt at CIC as well as for the payment of its bonds that was issued on 5 August 2009.
Xavier Jean, credit analyst at the Singapore branch of Standard & Poor’s, said that Bumi Resources still has pretty sizeable maturities beyond the convertible bonds, so the refinancing risk will remain high. He added that it seems pretty challenging unless they execute their planned large equity raising, or sell assets.
Bumi Resources has been one of the victims of the coal price slump. In the last two years, the company posted losses.
In 2010, Bumi Resources made global headlines when it teamed up with British financier Nathaniel Rothschild to form one of the world’s most powerful coal mining groups, London-listed Bumi Plc. Not long after, however, Rothschild accused the Bakrie’s of huge corporate mismanagement, thus causing a rift between both sides. After three years of dispute, the terms for the separation deal were finalized in March 2014.
Although the company is Indonesia's largest coal miner by production volume as well as the world's largest thermal coal exporter, Indonesian media portray the company and some of its subsidiaries as controversial due to debt woes and (corruption) scandals.