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Bumi Resources avoids default

World Coal,

According to a filing to the Indonesian stock exchange, Bumi Resources avoided a default by paying an overdue coupon on its US$ 300 million November 2016 bonds.

“The outstanding coupon has been paid today within the cure period,” director Dileep Srivastava said in the statement, which came after the exchange halted trade in Bumi’s stock and sought information on the payment’s status.

Jakarta-based Bumi had until 11 June to make the twice-a-year coupon payment after delaying by a month while it negotiated with creditors and lenders to ease its cash strain. The company, which had US$ 4.72 billion of short-term liabilities at the end of 2013, on 6 June asked bondholders for permission to extend the maturity on US$ 375 million of convertible notes that are coming due in August.

Bumi’s refinancing plan is being watched carefully by investors. Concern remains deep-set that non-payments among Asia’s riskiest borrowers will rise, as a slowdown hits some regional miners and property developers. Moody’s Investors Service expects speculative-grade defaults in the region outside Japan will climb almost 3% in 2014, according to a recent report.

Xavier Jean, a credit analyst at Standard & Poor’s in Singapore, said Bumi still has “pretty sizeable maturities beyond the convertible bonds, so refinancing risk will remain high. It seems pretty challenging unless they execute their planned large equity raising, or sell assets.”

The controversial Bakrie family own Bumi Resources. Aga Bakrie, one of the firm’s co-founders, recently entered into a virulent row on social media with financier Nat Rothschild.

The Indonesian company posted losses in the past two years, amid a slump in coal prices. Benchmark prices in the Southeast Asian nation have dropped 8.4% since 31 December, extending a two-year slide to the lowest level since 2009.

“The main underlying issue is the low coal prices,” Amit Jain, a credit analyst in Bangalore at SJS Markets Ltd., said in an e-mail. The company cannot sustain the current debt load. Coal producers are just looking to survive and wait for prices to improve.”

Bumi has called a meeting on 20 June in Singapore to seek consent from its convertible note bondholders to extend the maturity of the 9.25% debt to 2021, consent solicitation agent Deutsche Bank AG said earlier this week. Other terms haven’t been publicly disclosed.

Any investments based on hope

Analysts have grown increasingly wary over investing in Bumi. Rohit Gadkar, and emerging markets money manager at Trea Capital Partners SV in Barcelona, sold his holding in Bumi’s convertible bonds earlier this year because information on the company’s situation was hard to come by.

“I felt you’re taking a complete punt based on hope, and that type of trade doesn’t fit into my strategy,” Gadkar said in an e-mail interview. “There’s not enough transparency. I may revisit this once there is more clarity.”

Edited from various sources by Sam Dodson

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