Debt mystery Bumi Resources

Fund debt intrument format U.S. $ 1.9 billion China Investment Corporation by to PT. BUMI RESOURCES Tbk doubt. What is the scenario behind the big deal?

Stock Return foreman frenzy created by the scenario plays PT.BUMI RE SOURCES finasial Tbk (BUMI). The story starts from the investment agreement China Investment Corporation (CIC) on Bumi is U.S. 1.9 billion or equivalent to Rp 19 trillion which was signed on 18 September 2009. In a press release published on 23 September, Bumi management said the form of funding debtlike similar instruments or debt instruments.
Debt payments, agreed upon in stages over six years, consisting of U.S. $ 600 million is paid back in four years, U.S. $ 600 million in year five, and the remaining U.S. $ 700 million in its sixth year. This loan is subject to a cash coupons per year for 12 percen and IRR (internal rate of return) on 19 percen maturity. Senior Vice President of Investor Relations Bumi Resources, Dileep Srivastva explained, funds from the CIC will be used for restructuring debts and working capital.
For the sake of getting a loan from the CIC to pledge the shares of PT Bumi Arutmin Indonesia, PT Kaltim Prima Coal, Indo Coal Resources (CAYMAN), PT Indo Coal Resources South Kalimantan, and PT Kaltim Indo Coal Resources. Information about the stock guarantee the financial statements contained in the first half EARTH 2009 which was published late September 2009.

Bumi is mentioned 70 percen smoothly in four children shares her efforts. But do not explain the value of shares of four companies pledged money. In addition Bumi also admitted to pledge receivables and the transfer of rights and acceptance of the original sale of subsidiary guarantor. Unfortunately not explained well the original purpose of guaranteeing the subsidiary guarantor. "We can not describe the details because of confidentiality agreements tied to the CIC," said Dileep.
Not satisfied with that explanation Bumi, management of the Indonesia Stock Exchange again requested additional information. BEI questioned debtlike intrument model description referred to in the loan agreement, including how the term & condition it.
Besides setting a cash coupon of 12 percen IRR of 19 percen also considered improper and will burden the cash flow in the futureBumi. "If the interest difference between 12 percen-seven percent of nowhere," said Eddy Soegito. Director of the Company Appraisers BEI. Eddy asserted, prseroan disclosure should give explanation to market participants in making decisions.  Bumi management and re-convey the openness of information on 8 October 2009,. In addition to the use of loans subject, the Bumi also explained the mechanism of debt payments to the CIC. Dileep is said, the new debt impact on the debt to equity ratio of about 1.1:1, with the cost of debt is about 12 percen for the first three years. To pay principal, interest, and additional return on the IRR, each period of maturity including deb tobtained in the first three years, the amount of cash flow that the company would have exceeded U.S. $ 1 billion. In Year 4, the 5th, and 6th debt payment amount is less than 50 percen EBITDA.The coupon debt schemes and 12 percen IRR is 19 percen make debt covennant 4 X EBITDA. based agreement, if early payment or prepayment is done in accordance with the provisions agreement, and not penalized.

REPO TRANSACTIONS

Before the debt issue between CIC and spread BUMI, Bumi reportedly was reviewing funding options for refinancing the debt of U.S. $ 1.2 billion. The options put forward at the time of issuance of bonds and warran which reached U.S. $ 1 billion. The CIC, the investment institution, founded in 2007 that China's government has allegedly expressed an interest to absorb the bonds and issued warran Bumi. Way through the stock conversion agreement Earth in a given period.
It also denied rumors Bumi management. Bumi Management confirms pure CIC loans to debt conversion agreement with no shares. The purpose of the use of
loan from the CIC was mentioned as much as U.S. $ 1.2 billion for debt refinancing Bumi to other creditors. A total of USD 4116 billion or approximately U.S. $ 410 million will be used for repayment of debt to finance acquisitions during Earth 3 mining companies namely, BUMI PT Fajar Sakti, PT Pendopo Energy Coal, and Zurich Asset Investment which is the main business of PT Dharma Henwa Tbk (DEWA) . Time loan from CIC of U.S. $ 300 million budgeted for capital needs Bumi  Expenditure this year.
Acquisition value of these mining companies 3 reached USD 5116 billion and -Bumi has to pay the remaining Rp 1 trillion USD in 4116 trillion would pay off the debt from the CIC.
Capital market observers, Yanuar Rizky have interesting analysis. According to the transaction of U.S. $ 1.9 billion it actually did not involve Bumi. This way more to the transactions between the Lender Repo Bumi JP Morgan with the CIC. "So the money did not flow into the Earth, because it forms repo transfer to other creditors. CIC in this case," he said.

ence Yanuar transaction assess the consequences of it is nothing but a hostile take offer. In oprasional cash flow, Bumi believed akn not able to pay principal and interest debt. "The repo name must culminate in hostile take offer. Moreover, the CIC does have a tendency to control the energy sector in Indonesia," he said.
He added, "In fact JP Morgan was willing to sell EARTH poem last year, but because the bidder only CIC, they survive as frying EARTH in the market. Na but the urgent need for liquidity, JP Morgan was forced to sell it also to the CIC," he explained.
Based on the calculation Yanuar, principal debt reached U.S. $ 19 billion a material transaction, even achieve 30 percen of total foreign exchange reserves of Indonesia. Moreover, the loan interest cost is quite high around 12 percen and IRR of 19 percen in the form of dollars. "Fed funds interest rate near zero, as well as U.S. Treasury Bills his term most expensive flowers almost 10 years 4:45 percen how could EARTH agreed that high interest," Yanuar information.
Yanuar hope, Bapepam-LK as the capital market authority to examine EARTH and asked him to make detailed disclosure about the transaction scheme.