Bumi US$3,2 billion deal on the verge of collapse?
The deal of the year between PT Bumi Resources Tbk and PT Borneo Lumbung Energi worth US$3.2 billion is on the verge of collapse, people close to deal said. Why?
Well, the main reason is Borneo's difficulty in raising enough funds to finance the deal in both equity and loans. Under the initial plan, Borneo supposedly should raise US$1 billion from prospective investors and the rest from new loans arranged by Credit Suisse. The respond from investors has been well below expectation.
Even so, PT Bumi Resources Tbk will likely only get net proceeds of US$1.8 billion out of US$3.2 billion divestment of two coal mining subsidiaries PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia due to heavy debts and payables.
An investment banker close to the deal said out of the US$3.2 billion deal, US$800 million would be to pay Bumi's debt and US$600 million to pay contractors and suppliers of KPC and Arutmin.
On top of this, yesterday Simon Sembiring, director general of mineral and coal at the ministry of energy disclosed six coal mining producers payables to government of US$450 million of which KPC at around US$110 million and Arutmin at US$70 million. The payables are payments that should have been made by coal mining companies in the period of 2001-2005 as coal production proceeds (dana hasil produksi batubara, DHPB). Simon said government had sent notification letter to six companies mentioned (KPC, Arutmin, Kideco, Adaro, Berau, and BHP Kendilo Coal) to immediately settle the payment in 14 days or government will declare default on all of them. But Simon admitted coal miners rejected to pay the DHPB since 2001 because tax office impose added value tax which was not dictated in the first generation of coal working contracts. So, this is a pending legal problem and it's depend on how the ministry of energy and finance settle the royalty and tax issues.
PT Borneo Lumbung Energi has been struggled to get US$3.2 billion funding for the acquisition of Bumi's assets in which CSFB would raise US$2.2 billion loans and Borneo's equity of US$1 billion. So far, Nirwan Bakrie is reportedly had subscribed US$200 million equity for the transaction, while other parties have not committed yet.
"The question is how much equity Renaissance/Borneo could raise to pay Bumi. If they fail, most likely will only get promissory notes," the banker said.
Several names, such as Marubeni and Leighton Contractors, were expected to participate in the acquisition. But Marubeni is reportedly don't want to put equity. Leighton was participated in the US$404 million financing of the acquisition by PT Bumi Resources of PT Kaltim Prima Coal few years ago.
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Well, the main reason is Borneo's difficulty in raising enough funds to finance the deal in both equity and loans. Under the initial plan, Borneo supposedly should raise US$1 billion from prospective investors and the rest from new loans arranged by Credit Suisse. The respond from investors has been well below expectation.
Even so, PT Bumi Resources Tbk will likely only get net proceeds of US$1.8 billion out of US$3.2 billion divestment of two coal mining subsidiaries PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia due to heavy debts and payables.
An investment banker close to the deal said out of the US$3.2 billion deal, US$800 million would be to pay Bumi's debt and US$600 million to pay contractors and suppliers of KPC and Arutmin.
On top of this, yesterday Simon Sembiring, director general of mineral and coal at the ministry of energy disclosed six coal mining producers payables to government of US$450 million of which KPC at around US$110 million and Arutmin at US$70 million. The payables are payments that should have been made by coal mining companies in the period of 2001-2005 as coal production proceeds (dana hasil produksi batubara, DHPB). Simon said government had sent notification letter to six companies mentioned (KPC, Arutmin, Kideco, Adaro, Berau, and BHP Kendilo Coal) to immediately settle the payment in 14 days or government will declare default on all of them. But Simon admitted coal miners rejected to pay the DHPB since 2001 because tax office impose added value tax which was not dictated in the first generation of coal working contracts. So, this is a pending legal problem and it's depend on how the ministry of energy and finance settle the royalty and tax issues.
PT Borneo Lumbung Energi has been struggled to get US$3.2 billion funding for the acquisition of Bumi's assets in which CSFB would raise US$2.2 billion loans and Borneo's equity of US$1 billion. So far, Nirwan Bakrie is reportedly had subscribed US$200 million equity for the transaction, while other parties have not committed yet.
"The question is how much equity Renaissance/Borneo could raise to pay Bumi. If they fail, most likely will only get promissory notes," the banker said.
Several names, such as Marubeni and Leighton Contractors, were expected to participate in the acquisition. But Marubeni is reportedly don't want to put equity. Leighton was participated in the US$404 million financing of the acquisition by PT Bumi Resources of PT Kaltim Prima Coal few years ago.
Labels: Bakrie, Bumi Resources, COAL, CSFB, MARUBENI
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posted by yosef at 4:33 PM
3 Comments:
Why don't you say something about how Bumi reach its current position. How it acquire stakes in the KPC. And the osutstanding amount that must be paid to the Government of Indonesia. I assume you know about the background story. This is an unfinished story.
I suggest you read my previous posts on Bumi acquisition of KPC etc. Sorry that I didn't post some links...but you could search through this humble blog...let me know if you need further information...
I got short questions: I believe this divestment of Bumi Resources must received approval from Men-ESDM. Has he sought approval from the President? And what about the regulation that divestment of 51% shares to the government must be made before making any divestment? Do you think this is an illegal move ?
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