The juggling of debt by Indonesia’s billionaire Bakrie family is giving investors the jitters, with little sign of an end in sight.
A group of lenders, led by Credit Suisse Group, has asked the Bakrie Group to add $100 million in cash to the collateral of a loan after a plunge in the value of the family’s shares in London-listed coal company Bumi PLC that are backing the loan. The Friday deadline for the cash infusion passed without payment, say people familiar with the deal, so now the more than 20 lenders and the Bakrie Group, which is one of Indonesia’s most important and influential conglomerates, have to negotiate over what happens next.
While the lenders say the Bakrie Group is technically in default, they are giving the family more time to raise the money or suggest other options. Among the options could be a partial cash payment, an early payment of the complete $440 million loan (originally due May 2013), or even a waiving of the top-up request should Bumi shares rebound, said the people familiar with the deal.
“They are discussing a number of alternatives, but it is too early to speculate on what the end result will be,” said one person familiar with the discussions. “The international investors have a very good relationship with the Bakrie Group,” so they are willing to wait, he said.
The confusing news flow connected to the Bakrie Group’s debt and its companies has hammered the share prices of companies involved.
Despite the Bakrie Group’s good relationship with the lenders, there could be more debt drama as both sides play hardball in negotiations. Lenders want to pressure the Bakrie Group to sweeten the deal somehow because they say it has breached the loan contract. Meanwhile, people within the Bakrie Group say they have a different interpretation of the loan agreement and don’t think they are required to pay a cash top up.
Investors had to deal with a regular flow of speculation and rumours when the plunging price of Bumi triggered a similar request on a larger loan late last year from the same group of lenders. The Bakrie Group failed to raise the money and was given months to come up with a solution. It eventually sold half its stake in Bumi to Indonesia’s top coking-coal producer, PT Borneo Lumbung Energi & Metal, to pay off most of the $1.35 billion loan. The $440 million is the remaining debt after that transaction, and is secured by the Bakrie family’s remaining 23 percent stake in Bumi.
Bumi’s shares, which were listed in London last year in a backdoor listing through a share swap with financier Nathaniel Rothschild’s investment firm, have plunged more than 55 percent from last year’s peak.