Marubeni vs Sugar Group continues

Legal dispute between Marubeni Corporation and PT Sweet Indolampung, a subsidiary of Sugar Group of Companies, continues at Central Jakarta district court. 

In the court proceeding yesterday, Indolampung rejected Marubeni's claim of defaulted payment of 3.52 billion yen and US$7.92 million.

Hotman Paris Hutapea, lawyer for Indolampung, insisted Marubeni is not one of their creditors. Hotman said Lampung court had rejected similar claims from Marubeni. Marubeni will have two weeks to respond Indolampung's defense statement. 

In a related development, Judicial Commission will examine Supreme Court justice Djoko Sarwoko for his role in the ruling on legal dispute between Marubeni and Indolampung in Jakarta court. 

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Borneo trying to get Marubeni on board

PT Borneo Lumbung Energi is apparently trying to get Marubeni Corporation on board of the US$3,25 billion acquisition of two coal mining assets from PT Bumi Resources Tbk.

"Senior officers of Renaissance Capital is in Tokyo to get Marubeni on board," said people close to the deal. Renaissance Capital's Samin Tan is the majority owner of Borneo Lumbung which supposedly close the deal last Friday.
No explanation on why Borneo failed to close the deal despite rumors of financing and legal issues.
"Lawyers are still fighting on each other," the executive said over the weekend.
It's not clear what subject they're fighting for. "But creditors and investors are worried about some life-time contracts with the mining subsidiaries. Besides they impose some conditions to make sure the cashflow management will secure the interest payments," he said.
Samin Tan dismissed speculation of financing difficulties last week saying Credit Suisse had raised the necessary US$2.1 billion loan and Singapore's UOB would provide US$700 million exchangeable bond.
It's the bond that Marubeni is being offered to. "It's not easy to sell bond at the moment," the executive said.
The loan being arranged by Credit Suisse will include US$1 billion over five years, $600 million over six years, and $500 million from an eight-year mezzanine loan, which usually includes warrants that can be converted into equity.

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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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Bumi Resources gets below US$1.8 billion

PT Bumi Resources Tbk will likely only get net proceeds of US$1.8 billion the most 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.

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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Why Bumi Resources need debts?

Just days after it signed the divestment of PT Kaltim Prima Coal and PT Arutmin Indonesia at US$3.2 billion, PT Bumi Resources Tbk signed new loan of US$200 million with Credit Suisse First Boston (CSFB). CSFB also arranged funding for PT Borneo Lumbung Energi which acquired KPC and Arutmin from Bumi.
It's unclear of how much of the US$3.2 billion that supported by loans arranged by CSFB. But sources said Borneo provided US$100 million, Marubeni Corp at US$900 million, and the rest from CSFB arranged loans.
What's weird is the latest US$200 million loan to Bumi to be paid in July 2006 when Bumi would merge with PT Energi Mega Persada (EMP).
I really don't get it. Bumi is expected to get US$2.7 billion from KPC and Arutmin divestment as US$500 million of proceeds will be used to pay Bumi's debts. Surprisingly Bumi said the it would use the US$200 million loanto strengthen its working capital.
Anybody can explain what's going on exactly?

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Bumi needs new name like No Resources Co.

In a quiet move that only limited shareholders (most likely controlling ones) aware of, PT Bumi Resources Tbk offloaded two of its key assets PT Kaltim Prima Coal and PT Arutmin Indonesia to PT Borneo Lumbung Energi for US$3.2 billion.

Those who got the early information or involved in the transaction had taken huge gain out of the transaction. Look at the BUMI's share price prior to the transaction (graph from Bumiresources.com). What actually is the benefit of this transaction for public shareholders? Why Bumi decided to sell KPC and Arutmin to Borneo and not other investors? Who are the beneficiary owners of this transaction? What's left? Who got the money and how much? Did they ever tell or ask approval of public investors about the material transaction? Did they tell Bapepam (Indonesia's SEC)?

All of us knew after the fact that Bumi had appointed two securities firms, PT Danatama Makmur and PT JP Morgan Securities Indonesia, as advisors for the transaction. We also knew after the deal had been done if that's in line with the company's business strategy to become Indonesia's best performing energy and natural resources company.

Surprisingly market authorities not just did nothing to investigate what's going on but welcome the transaction even before they do their homework. "So many questions are left unanswered, but authorities seems to put a blind eye. The transacation has clearly screwed up minority investors," said one analyst.

Without KPC and Arutmin, Bumi Resources is a shell company without assets. That's why I suggest the company to consider a new name like PT No Resources Tbk. A friend suggest the name of PT Shell Resources Tbk, but I said the real energy giant Shell will surely take legal action on that.

Ok, let's go back to the transaction. Bumi Resources got US$3.2 billion. What to do?

- Pay debts to PT Energi Mega Persada Tbk for US$500 million. And then merger in July with Energi Mega. Imagine how Energi Mega's public investors or minority investors. They'll be screwed up again.

- Pay out the bonds early at US$600 million.

- Embarks on US$3 billion coal-to-liquid project with SASOL among others. But SASOL denied it straight. So forget about it for a while. The CTL project is a far away dream.

- Investing in new businesses such as bio-mass, upgraded brown coal, briquettes, bio-diesel, and power plants. But all of these are long-term plans.

What the readers said about the deal?

An old friend wrote this two days ago:

It would seem to be a handy tool to allow the Bakries's to leverage the company up to the hilt. If you cannot have a standard bank to suck up investors money to recycle in your business, buy yourself in to a "so called" investment bank. I can only conjecture that this is a sham transaction merely to leverage the coal assets to the hilt whilst prices are high.

I would guess that Marubeni have agreed to a certain offtake agreement for X years to support the loan and at the end of the day it is Bakrie still with controlling shareholding.With the ongoing unrest amongst foreign resource companies the Bumi policy of getting foreign assets at bargain prices at moments of unrest could be unfolding again. I can only guess the coal to liquids is a very obvious red herring.

And this...

I thing coal to liquid is rediculous plan of Bumi Resources. If They want to leap its tentacles to coal to liquid, sol why did they sell two 'diamons'????Are they sick?

Another friend...

It seems like a financial engineering done by Bumi Resources. Along with huge profit from the sale, Bakrie Family who owns Bumi Resources has dreamed to enlarge the company as well as Australian BHP Billiton and Xstrata.I am sure that Borneo or Samin Tan is just a middle man who is willing to sell KPC and Arutmin to Bumi and chip in the assets into Energi Mega Persada.Bumi will offer a share swap for Energi Mega's shareholders to support the giant making of integrated energy company, PT Bumi Energi.

Or this one from a real 'old' friend:

Samin Tan's comments this week that "we will not sell Bumi again for the time being" shows that Renaissance has not only bought the two Bumi mines through Borneo Lumbung Energi but is also calling the shots in Bumi, ergo, is VERY close to the Bakries, a persistent rumour that Bakrie spokesmen have consistently denied to local media several times.

This is highly significant. WHY? Because it puts the Bakrie's right back in the middle of all the action through Renaissance and its success with the PPA.

Assuming that Beckkett loses the Singapore action, and Edwin hooked up with Tan, Renaissance and the Bakries would still have 20% of Indonesia's biggest coal producer with the Adaro mine, 40% of which was bought in Deutsche's firesale of the assets! Renaissance is well in with the PPA which holds all the unsold IBRA assets pledged to the government by indebted tycoons.

Renaissance can broker funds into deals that many lenders would not touch and allow Bakrie free rein with his supreme lobbying ability in the corridors of power and with the Group's ability to leverage big deals with litle capital. Also with Renaissance up front, but not obviously linked, the Bakrie Group need not fear any of the stigma attached to them for being, at one time, one of Indonesia's biggest indebted conglomerates.

These are smart, smart guys (Tan and the Bakries) hence my suggested reemergence of the Indonesian version of the Asia tigers (albeit formerly applied to Asian tiger economies of old). Acting together they have the Midas Touch. Finally, note the resurrection of the pribumis, not the Chinese. Indonesian resources owned and operated by pribumi Indonesians? Amen, I'll drink to that.!

As for me,

I need to meet Bumi Resources management, advisors, analysts, buyers, and securities exchange authorities to get the answer of all my stupid questions. Appreciated all the comments, and would love to have all of you answer some of the questions.

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Behind the US$3.2bn acquisition of KPC & Arutmin

PT Borneo Lumbung Energi finally won the US$3.2 billion deal to acquire two major coal producers PT Kaltim Prima Coal (KPC) at 95% sgares and 100% shares of PT Arutmin Indonesia from PT Bumi Resources Tbk. While the US$3.2 billion acquisition already become the largest acquisition in the country's stock market history, the deal is most likely just the beginning of something big.

Who are the beneficiary owners of the deal?

PT Borneo Lumbung Energi is owned by two shareholders of PT Renaissance Capital Asia, Mr Samin Tan and Mr Suryadinata with 75% and 25% shares respectively. With such scheme, the new owner have nothing to worry about the requirement to have minimum 51% shares of both KPC and Arutmin by Indonesian.

But for sure, Samin Tan and Suryadinata have no such amount of money. They got full support from four enterprises. They are PT Renaissance Capital Asia, Marubeni Corporation, Thiess Contractor, and DBZ. It's not clear of how much equity and debts in the deal. But sources said US$1 billion of equity and US$2.2 billion of debt arranged by Credit Suisse First Boston (CSFB).

Marubeni has reportedly deposited US$150 million, while Bakrie Family at US$700 million.

What's next?

PT Bumi Resources will acquire oil and gas producer PT Energi Mega Persada Tbk, and develop coal to liquid technology with South Africa's SASOL. The merger would likely to materialize next year.

New investments: Oil, gas, coal to liquid, biodiesel, biomass, and electricity.

What the Borneo Energi will do next?

That would be the vehicle to acquire PT Indocopper Investama which controls 9.4% shares of PT Freeport Indonesia. Bakrie Family once controlled the company before Soeharto's golf buddy Mohammad 'Bob' Hassan acquired Bakrie shares with Freeport's full financial support. Hasan failed to service the debts to Freeport which led to the US company's control of 100% of Indocopper. The value of Freeport's 9.4% shares is predicted at US$1 billion.

PS: Special thanks to a friend who is kind enough to provide most of the information in this article.

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Bakrie Family behind Renaissance on KPC & Arutmin deal

A consortium led by Renaissance Capital had signed the sales and purchase agreement (SPA) with PT Bumi Resources Tbk to acquire Bumi's shares in two major coal producers, PT Kaltim Prima Coal and PT Arutmin Indonesia at US$3.2 billion.

Geroad P. Yusuf, Corporate Secretary at Bumi Resources disclosed this morning that PT Borneo Lumbung Energi had signed the SPA yesterday. PT Borneo Lumbung Energi, an affiliation company of PT Renaissance Capital, acquired 95% shares of KPC, 100% of Arutmin, and 100% PT Indocoal Resources Ltd.

Yusuf didn't disclose members of Renaissance Capital consortium. But some says Bakrie Family and Marubeni Corporation are among others.

Sources said Bakrie Family and other members of the consortium put US$750 million in the consortium with the remaining US$2.5bn from debt instruments provided by some banks with Credit Suisse First Boston (CSFB) as the arranger.

Earlier this morning, Marubeni Corp had deposited US$150 million to Bumi's escrow account for the transaction.

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Anglo American competes to acquire KPC & Arutmin

UK-based giant mining and natural resources company, Anglo American, is said to compete with Marubeni Corp in the acquisition of PT Bumi Resources shares in PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia.
"I think for KPC and Arutmin, the party everyone's focused on now is Anglo American. But how about the 51% local ownership requirement," an investment banker said last night.
Anglo American is a global leader in mining and natural resources. The company was formed in May 1999 through the combination of Anglo American Corporation of South Africa (AACSA) and Minorco. It has its primary listing on the London Stock Exchange and is majority owned by UK institutions.
Anglo American has interests in 16 base metal operations in seven countries, particularly in Brazil, Chile, Ireland, Peru, South Africa, and Venezuela.
In Indonesia, Anglo American's exploration milestones includes discovery of the Purnama gold deposit at Martabe (1998), discovery of Aisasjur gold deposit in 1997, and its formation this year of a strategic alliance with Austindo Resources (controlled by George Tahija) to explore in Papua.
But why KPC & Arutmin?
Well, Anglo American's coal interests are held through wholly owned Anglo Coal, one of the worlds largest private sector coal producers and exporters with total assets of US$2.5 billion. Anglo Coal is an international coal producer with mining operations in South Africa, Colombia, Venezuela and Australia. It produces thermal, PCI (pulverised coal injection) and metallurgical and coking coals for international customers in the Med-Atlantic and Indo-Pacific markets as well as local customers in South Africa and Australia.
Back to the question on 51% local ownership requirement, whoever would buy the shares, I would say the maximum amount that is 'safe' would be 49% in both KPC and Arutmin. But who want to spend US$2.5 billion without majority control? This is the question I still have to find the right answer.
KPC was owned by BP & Rio Tinto, while Arutmin was owned by BHP (Australia). All of these foreign investors, by law, should divest up to 51% shares in a certain period to local investors. That was the justification for the Bumi Resources acquisition on KPC and Arutmin. But now the case is in the reverse version. I'm not sure if government would allow that.

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Bumi Resources confirmed the divestment of KPC & Arutmin

Ari Hudaya, CEO of PT Bumi Resources Tbk, confirmed my earlier reports that the company is in the process to divest all its shares in two major coal producers PT Kaltim Prima Coal and PT Arutmin Indonesia.

Detik.com reported that after the divestment Bumi would launch the merger with oil and gas producer PT Energi Mega Persada Tbk.
Besides, Bumi will develop coal to liquid technology with South Africa's SASOL, the largest producer of diesel oil from CTL technology. Both companies are planning to develop CTL in South Sumatra.
But Hudaya neither confirmed nor denied Marubeni as the potential buyer for KPC and Arutmin. Sources said the deal could be somewhere around US$2.25 billion.

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Marubeni acquires KPC-Arutmin US$2.25 billion

As I reported earlier, Marubeni Corporation is apparently acquiring two coal producers PT Kaltim Prima Coal and PT Arutmin Indonesia from PT Bumi Resources Tbk with price tag of US$2.25 billion, people close to the deal said.

Credit Suisse First Boston (CSFB) is advising Marubeni Corporation, Japan, for the deal, while JP Morgan for PT Bumi Resources Tbk.

Bumi would use the proceeds from KPC and Arutmin to buy Freeport Indonesia shares.
"They need money to buy Freeport shares. The buyer, Japanese trading company, seems to offer huge amount of money that the company can't resist. The amount may well above US$2.25 billion," said another banker.
Marubeni Corporation is one of the largest coal traders in the world. "Marubeni use its internal funds to finance the transaction."
PT Bumi Resources Tbk, which controls PT Kaltim Prima Coal and PT Arutmin Indonesia, was reportedly planned to acquire shares of Freeport Indonesia. Meanwhile, Marubeni owns shares in coal mining operations in Australia and Canada.

Koran Tempo reported today market rumor that Bumi Resources would sell some shares in KPC to acquire electricity company PT Indonesia Power.

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Major coal transaction is underway in Indonesia

A major coal transaction is underway in Indonesia. One company that controls two major coal producers in the country is about to leave the business for another transaction, buy Freeport shares.

"For sure there will be a transaction, but I don't know the buyer," said one investment banker in a SMS today.

The company has close relationship with the group which keen to acquire copper and gold mining giant PT Freeport Indonesia.

"They need money to buy Freeport shares. The buyer, Japanese trading company, seems to offer huge amount of money that the company can't resist. The amount may well above US$2 billion," said another banker.

Credit Suisse First Boston is reportedly handle the transaction on the buyer side, while JP Morgan is advising the seller.

Other sources said Marubeni Corporation, one of the largest coal traders in the world, is the company involved in the transaction.

PT Bumi Resources Tbk, which controls PT Kaltim Prima Coal and PT Arutmin Indonesia, was reportedly plan to acquire shares of Freeport Indonesia. Meanwhile, Marubeni owns shares in coal mining operations in Australia and Canada.

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