||Asean Affairs 10 June 2013
Moody’s downgrades BUMI’s rating
PT Bumi Resources’ (BUMI) financial uncertainty has prompted ratings agency Moody’s Investors Service to downgrade its bond ratings to B3 from B2.
The downgrade, announced in Singapore on Friday, has been implemented toward the senior secured bonds issued by Bumi Capital Pte. Ltd. and Bumi Investment Pte. Ltd., which are both wholly owned subsidiaries of publicly listed BUMI.
Simon Wong, Moody’s vice president and senior analyst, and the lead analyst for Bumi Resources, said that the downgrade reflected the agency’s concern about BUMI’s ability to refinance its upcoming debt maturities in a timely manner, given the delays in BUMI’s separation from London-listed Bumi plc and the stoppage of work by a mining contractor at the Arutmin mine in South Kalimantan since last April.
“The uncertainty over Bumi Resources’ shareholding structure has in turn delayed the refinancing of its upcoming debt maturities in Q3 of 2013,” the agency wrote in a statement.
The Bakrie Group has reportedly proposed taking back Bumi plc’s 29.2 percent stake in BUMI in a share swap and cash transaction amounting to US$278 million.
The group had agreed to sign a definitive agreement on the separation by May 30 and to pay the necessary funds five days after. The deadline, however, has been extended to June 26, pending approval from Bumi plc’s shareholders.
The agency has also placed the ratings on review for a further downgrade.
According to Moody’s, the review will focus on BUMI’s ability to refinance its scheduled near-term maturities, particularly its US$150 million loan due in August; to reduce its debt level through asset sales; and to restart operations at Arutmin’s Senakin and Satmui mines immediately, while avoiding a material adverse impact on its full-year production target and operating cash flow at the same time.
Moody’s will downgrade the ratings further if BUMI is unable to refinance its maturity due in August by the end of June.
By the end of last year, BUMI recorded a total of $4.28 billion in consolidated debts.
It needs to refinance $634 million of the debts, which will be due within the next 12 months.
In addition, Moody’s also noted $406 million in loans at PT Bumi Resources Minerals (BRMS),
a BUMI subsidiary, that would mature in September.
As of last year, BUMI had $45 million cash-on-hand, $100 million restricted cash in banks, $6.92 billion total liabilities and $392 million equity. The company reported a net loss of $666.21 million for the 2012 fiscal year.
Moody’s said that BUMI’s liquidity risk was very high at the holding company level given the structural separation from the underlying coal assets, which are the major contributors to the group’s cash flow.
“Also, the group’s ability to generate free cash flow will be limited because of weak coal prices,” it added.
BUMI’s shares closed at Rp 600 (6 US cents) on Friday, down 3.2 percent from Wednesday.