Indonesia's Borneo Lumbung to buy Bumi stake for $1 billion

The owner of Borneo Lumbung Energi Samin Tan (C) accompanied by Bobby Gafur Umar, chief executive officer of Bakrie & Bros (L) speaks during a news conference in Jakarta November 1, 2011.

SINGAPORE/JAKARTA (Reuters) - Indonesia's Bakrie Group is selling a 23.8 percent stake in London-listed Bumi Plc (BUMIP.L), its joint venture with financier Nathaniel Rothschild, to coal miner PT Borneo Lumbung Energi (BORN.JK) in a $1 billion deal to avoid a loan default.

The deal with Borneo, which is backed by Indonesian businessman Samin Tan, would help Bakrie pay off the bulk of a $1.35 billion loan and extricate itself from a debt crunch that has weighed on the share price of one of the world's largest coal exporters, Bumi Resources (BUMI.JK).

The agreement between the Bakrie Group, run by one of Indonesia's most powerful families, and Tan marks the second time in three years that the Bakrie family has had to scramble together a transaction to ease its debt.

The deal was sealed after Swiss-based Glencore (GLEN.L), the world's largest diversified commodity trader, dropped out of talks on refinancing the Bakrie loan.

It also marks the second time that Tan, a former partner at accounting firm Deloitte, has negotiated to buy a stake in Bumi, having failed to strike a bold deal in 2006.

Tan succeeded this time, with PT Borneo confirming the agreement in a statement.

It said the total cash consideration of $1 billion valued Bumi Plc shares at approximately 10.91 pounds each at the date of the announcement. That translates to a 6 percent premium to the last 6-month volume-weighted average price.

"The biggest haircut in this deal has been taken by the Bakries," said a source with direct knowledge of the deal. "They have lost half their stake in Bumi Plc."

GLENCORE TALKS FAIL

Talks between the Bakrie Group and Glencore fell through because lenders were not comfortable with the structure of the proposal, sources close to the deal told Reuters earlier.

Glencore had been looking for additional marketing rights over Bumi's coal in return for lending Bakrie $800-$900 million.

"We think it is net positive for Bumi not having to incur higher marketing costs from allocating greater volumes to the trader," said Singapore-based UBS analyst Andreas Bokkenheuser in a note to clients.

Glencore has frequently used its deep pockets to help out troubled counterparties, cementing the relationships it sees as key to its business.

However, stock investors remained apprehensive as shares of PT Bumi Resources (BUMI.JK) and coking coal producer PT Borneo Lumbung Energi & Metal both fell.

PT Borneo slid 11.7 percent and Bumi fell 4.3 percent, compared with a drop of 1.3 percent for Jakarta's benchmark index .JKSE.

A top 10 shareholder in Bumi Plc suggested the apprehension was misplaced.

"The most important thing is that the Bakries are still involved, and putting a JV together with fellow Indonesians I don't think is necessarily a bad thing," said a source at the institutional investor, who declined to be identified because he is not authorized to speak to the media.

Tan indirectly controls 73 percent of PT Borneo and also owns Indonesian investment bank Renaissance Capital.

The Bakrie Group, a sprawling conglomerate with interests in property, energy, plantations, coal and telecoms, also fended off debt crises in 1998 and 2008.

Its controlling family is headed by Aburizal Bakrie, chairman of Indonesia's Golkar Party, who many analysts believe will run for the presidency of Southeast Asia's largest economy in 2014.

CONTROL OF MINES

Tan, an ethnic Chinese Indonesian from a small city in central Sumatra whose family were fish traders, was described by Borneo directors as a straight forward, no-nonsense character addicted to work.

In a 2006 interview with Reuters, Tan described himself as a "simple, homegrown financial professional". He said Renaissance was independent of Bakrie.

"The deal is not only about Bakrie," he told reporters on Tuesday. "It's a world-class asset they have here and it's undervalued too."

The deal is part of the Bakrie family's attempts to refinance the loan obtained in March this year to consolidate debts.

Credit Suisse (CSGN.VX) arranged the loan, secured against the Bakrie Group's roughly 47 percent stake in Bumi Plc, and lenders included the Swiss bank and a group of hedge funds.

Standard Chartered (STAN.L) is advising Borneo and is also arranging the financing, while Credit Suisse (CSGN.VX) is advising the Bakrie family and its various entities, the sources said.

"The transaction also provides BORN (Borneo) with exposure to a high-quality metals portfolio, thus transforming BORN from a pure coking coal producer into a world class diversified natural resources producer," Tan, who is also president director of PT Borneo, said in a statement.

After the transaction, Borneo together with PT Bakrie & Brothers Tbk and Long Haul Holdings -- companies controlled by the Bakrie Group -- would own an approximate 47.6 percent stake and an approximate 29.99 percent voting interest in Bumi Plc, according to deal documents .

The deal is subject to approval of Borneo shareholders in a meeting on December 15 -- a formality since the deal document states Tan's vehicle, PT Republik Energi & Metal, will put its 73 percent holding behind the agreement -- and certain other conditions, including regulatory approvals.

Bumi Resources' share price has been weighed down by investor concerns over high-debt levels and transparency. Indonesia's stock exchange said last year it would fine three Bakrie firms, including the family's holding firm Bakrie & Bros, for failing to explain discrepancies in their financial reports.

Barclays Capital is providing a $200 million bridging loan to Bumi Resources, Basis Point reported.

The London-listing, a joint venture engineered by Rothschild, the billionaire scion of the European banking dynasty, through a complex reverse takeover, was meant to bring greater corporate governance and better access to capital.

But a sharp decline since June in the share price of Bumi Plc amid falling equity and commodity markets triggered a mandatory repayment clause on the one-year $1.35 billion loan that had been due to mature in March 2012.

(Additional reporting by Michael Flaherty, Janeman Latul and Harry Suhartono; Editing by Alex Richardson)