RPT-UPDATE 2-Shareholders of Indonesia's Bumi approve CIC debt deal

Sun Jan 12, 2014 9:25pm EST

* ARM said voting not appropriate given stake sale plan

* Deal with CIC cuts Bumi's debt by about 30 percent

* CIC gets 18 percent in Bumi Resources

By Fathiyah Dahrul and Eveline Danubrata

JAKARTA, Jan 10 (Reuters) - Shareholders of Indonesia's Bumi Resources, Asia's biggest thermal coal exporter, approved a crucial $1.3 billion debt-for-equity swap deal with China's sovereign wealth fund, CIC, even without the presence of its largest owner.

Only one-third of shareholders were required to approve the deal after the Indonesian company delayed a previous vote from Dec. 20.

"I hope the deal will be final before Chinese New Year, this month," Andrew Beckham, a director at Bumi Resources, said.

A collapse of the Chinese deal would have been disastrous for Bumi Resources, which has suffered downgrades from ratings agencies and faces a heavy debt burden even as coal prices remain soft.

Asia Resource Minerals (ARM), which owns 29 percent of Bumi Resources, said late on Thursday it would not attend the shareholder meeting on Friday.

ARM, formerly known as Bumi Plc, said in a previous statement that its participation in the vote would not be appropriate, since its stake in Bumi Resources should soon be transferred to the Bakrie Group as part of a complex separation of ARM from the influential Bakrie family that co-founded it in 2010.

Under the deal, the Bakrie family is to sell its stake in ARM to outgoing chairman Samin Tan and buy back ARM's stake in PT Bumi Resources as part of a plan to revive the London-listed company after it was battered by boardroom rows and weak coal prices.

"I think from an Asia Resource Minerals' point of view, it was a wise move not to take part to the vote, as it could have been seen as conflicted because of the separation," a source close to ARM said.

"The deal with CIC dilutes all other equity holders but also takes debt off the balance sheet, which is beneficial. So if you do the math, it's actually good for the shareholders."

EXPENSIVE DEBT

Under the proposed deal, CIC will convert the $1.3 billion owed to it by Bumi Resources into stakes of 19 percent in PT Kaltim Prima Coal, 42 percent in Bumi Resources Minerals and around 18 percent in Bumi Resources.

The transaction would cut Bumi Resources' total debt by 30 percent to $3.4 billion from a September 2013 level of $4.9 billion, according to a company presentation in December.

Bumi called the deal the "complete solution to most expensive debt in the company's capital structure" and said it would also lead to a "material reduction" in annual interest costs and an improvement in free cash flow.

"If it goes through, it's good for everybody. If it doesn't go through, it's bad for everybody," S&P analyst Vishal Kulkarni said before the vote.

He said the deal was vital to cutting Bumi Resources' debt service costs and that if it had not gone through or even been delayed by three months, Bumi Resources would have had to line up another source of funding or find a way to sell some assets.

Bumi Resources bonds were trading close to 70 cents on the dollar, with those maturing in 2016 yielding 28.9 percent and those in 2017 24.1 percent. Both have rallied from a low last August of 53 cents.

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