Bangkok--14 Jun--Moody's
Moody's Investors Service sees no immediateimpact on Bumi Resources Tbk's ("Bumi") Ba3 corporate family rating andBumi Investment Pte Ltd's Ba3 senior secured notes rating from theproposed sale of a 75% stake in Bumi Resources Minerals Tbk ("BRM") toVallar PLC ("Vallar"), which will issue approximately US$2.1billion ofconvertible bonds to Bumi as consideration. The transfer is expected tobe completed in 3Q 2011.
The outlook of the ratings remains stable. "The disposal of a majority stake in BRM streamlines Bumi's operationalstructure and allows it to fully concentrate on its coal operations inIndonesia. It also reduces Bumi's exposure to the execution, political and expropriation risks pertaining to BRM's exploration and developmentprojects in high risk jurisdictions," says Alan Greene, a Moody's Vice
President and Senior Credit Officer.
From a cash flow perspective, Moody's does not expect any material impactarising from the proposed sale as BRM previously raised funds for itsdevelopment independently without any recourse to Bumi. After thecompletion of the transaction, BRM's debt will be excluded from Bumi'sadjusted financial metrics, but the overall improvement in leverage willnot be significant given the size of Bumi's total debt.
Moody's is also cognizant of the 2% coupon on the convertible bond. Vallar is expected to fund the semi-annual payments via cash flow fromBumi and Berau Coal, a 75%-owned subsidiary of Vallar, as it is aninvestment holding company with no operational cash flow.
"The proposed sale also provides Bumi with an additional financial instrument that may potentially be monetized and/or used to reduce itssubstantial debt leverage. However, the ability to reduce its debt issubject to the timely agreement of the counterparties. Meanwhile, thevalue of the Vallar convertible bond will be exposed to market pricingrisk," adds Greene, also Moody's Backup Analyst for Bumi.
Vallar owns 25% of Bumi through a share swap with the Bakrie Group inMarch 2011. Vallar intends to increase its stake in Bumi up to 50% andobtains control during 2011 via a further share swap with willing Bumishareholders.
BRM holds interest in iron ore, zinc, lead, phosphate, diamond, and goldconcessions located in Indonesia and Africa. Most of its projects arecurrently at the feasibility study/ exploration stage and are likely torequire substantial investments to bring them to production stage overthe medium-to-long term. It is listed on the Indonesia Stock Exchangesince December 2010 and is expected to maintain its listing after thetransaction between Bumi and Vallar. Bumi's current shareholding in BRMis 87.09%.
Please see ratings tab on the issuer/entity page on Moodys.com for thelast rating action and the rating history.
The principal methodology used in rating Bumi Resources Tbk was the GlobalMining Industry Methodology, published May 2009.Established in 1973 and listed on the Jakarta Stock Exchange in 1990,Bumi is Indonesia's largest thermal coal producer and one of the topthree largest thermal coal exporters globally. Through its principalassets (65% stake in PT Kaltim Prima Coal and 70% stake in PT Arutmin),Bumi accounts for approximately 21.8% of Indonesia's 2010 total coal production.