Bumi Shares Sink on Northstar News

JAKARTA (Reuters) – Shares in Indonesia biggest coal miner, PT Bumi Resources Tbk (BUMI.JK: Quote, Profile, Research, Stock Buzz), tumbled nearly 7 percent on Monday, surrendering early gains, on investor uncertainty over Bumi’s ownership and its group debt.

Shares in Bumi traded as high as 1,100 rupiah, up about 9 percent from Friday’s close, before plunging 9 percent to an intraday low of 920 rupiah.

The stock ended down 6.9 percent at 940 rupiah, compared with a 1.5 percent drop in the broader composite index .JKSE.

Bumi is the prize asset in the diversified Bakrie group, which has been struggling to raise money in order to repay about $1.2 billion of debt at a time when investors are pulling out of emerging markets such as Indonesia amid a global financial crisis and credit crunch.

Late on Friday night, the Bakrie group announced that most of its short-term debt problems had been settled following a deal with Indonesian private equity firm Northstar Pacific.

“For now, we see this as another chapter unfolding in the issue rather than a full resolution,” JP Morgan analyst Aditya Srinath said in a research report.

Northstar said late on Friday that it had agreed to take over a significant portion of the debt owed by the group holding company, Bakrie & Brothers (BNBR.JK: Quote, Profile, Research, Stock Buzz).

Founder Patrick Walujo said Northstar wants to convert the debt into shares in Bumi. However, terms of the debt-equity conversion are still being negotiated, leaving investors unclear about the size of Northstar’s stake in Bumi.

“While the deal has provided Bakrie & Brothers a lifeline in the restructuring of its debts, we think its complexity and opaqueness fails to remove the existing overhang on Bumi,” said Chee Yoke Fong, an analyst at Goldman Sachs, in a report.

“Given the uncertainties of the transaction, we think investors will seek more clarification before reacting, while focusing on the rapidly deteriorating fundamentals as regional coal spot prices fell by another 9 percent week on week to $78 a tonne.”

The deal could eventually give Northstar a substantial stake in Bumi.

Separately, Ancora Capital Management (Asia), another Indonesian private equity firm, has taken a stake of up to 5 percent in Bumi, worth about $75 million, a person familiar with the situation said on Saturday.

Bumi’s share price rose in the morning on the news, despite a separate announcement from Bumi reporting a 39 percent drop in nine-month net profit to $490.15 million from a year ago, when earnings were helped by a one-off gain.

Sales revenue for the period climbed 47.9 percent to $2.43 billion, due to strong coal prices in early 2008.

Bakrie & Brothers is controlled by the family of Indonesia’s chief social welfare minister Aburizal Bakrie, and has interests in palm oil, property and telecoms.

The group borrowed heavily to finance an aggressive expansion, using shares in Bumi as collateral.

But fears about the Bakrie group’s debts, coupled with the bursting of the commodity bubble and global market sell-off, knocked Bumi’s share price down from an all-time high of 8,750 rupiah to a 2008 low of 640 rupiah in November, or less than one-tenth of the peak value.

Bumi controls two major coal mines, PT Kaltim Prima Coal and PT Arutmin Indonesia, located in Indonesia’s resource-rich East Kalimantan province.

Both mines produce high quality coal used in power plants. The coal mining firm aims to sell 60 million tonnes of coal this year, or around a quarter of Indonesian output.

By Harry Suhartono and Andreas Ismar
(Editing by Sara Webb & Kim Coghill)