* Bumi says deal with CIC will cut interest costs by $216
* Analysts sees risk from shareholder vote at London-listed
* Raises coal output target this year by nearly 4 pct
By Fathiya Dahrul and Eveline Danubrata
JAKARTA, Nov 20 Indonesia's Bumi Resources
, Asia's top thermal coal exporter, is confident
shareholders will approve a $1.3 billion debt-for-equity swap
deal with China sovereign wealth fund CIC, which it
said will cut interest costs by $216 million.
Bumi Resources' bullishness on the transaction going through
comes as some analysts sense a risk to the deal, given that key
London-listed shareholder Bumi Plc is facing its own
serious test in a shareholder vote on a restructuring proposal.
A collapse of the Chinese deal will be disastrous for the
Indonesian company, which has suffered downgrades from ratings
agencies this year and faces bloated debt even as coal prices
remain soft. It will be a setback for CIC and could risk
recovery of its investment.
"We are very confident that this CIC deal will go through,"
Dileep Srivastava, a director at Bumi Resources, told Reuters on
the sidelines of a news briefing on Wednesday.
CIC agreed last month to convert the $1.3 billion owed to it
by Bumi Resources into a stake in the coal miner and associated
subsidiaries. Bumi Resources is controlled by the politically
connected Bakrie family.
Some analysts say the CIC deal could still be complicated by
the outcome of a December vote at Bumi Plc on the London-listed
company's planned split with the Bakrie family. Bumi Plc owns
29.2 percent of Bumi Resources.
Under the plan, the Bakries will sell their stake in Bumi
Plc to their current partner and outgoing chairman Samin Tan.
The Bakries will then buy back Bumi Plc's 29.2 percent stake in
Bumi Resources for $501 million, above the current market price.
But Bumi Plc has raised concerns about whether the deal can
get financed by the Bakries. The family has brushed off concerns
"There is a big risk that the (CIC) deal will not be
approved by shareholders," said an analyst at an Indonesian
brokerage, adding that institutional shareholders could
determine the outcome. The analyst did not want to be quoted
because of the sensitivity of the issue.
Andrew Beckham, a director at Bumi Resources, told reporters
the deal with CIC is expected to be completed next month if
approved by shareholders.
COAL OUTPUT TARGET RAISED
Bumi Resources expects output of 80 million tonnes this
year, nearly 4 percent higher than its earlier target of 77
million tonnes, Beckham told reporters.
The biggest thermal coal exporter in Asia projects coal
output of at least 110 million tonnes in 2015, according to a
filing to the Indonesian stock exchange. It produced 74 million
tonnes last year.
"Indonesian coal miners have been raising their production
to make up for a fall in coal prices. But bear in mind that cost
of goods sold will still be high," said Arandi Nugraha, a coal
analyst at Batavia Prosperindo Sekuritas, on Wednesday.
"Therefore even though production is increasing, this
doesn't mean that net profit will rise too," he said.
Coal production in Southeast Asia's biggest economy is
expected to increase by 5 percent to between 410-420 million
tonnes in 2014, but could go higher, a leading industry
association said last month.
In recent days, Bumi Resources bonds have edged higher on
expectations that its lenders who had a put option exercisable
in November on a $150 million loan would not exercise this
right. The 2017 recovered to 67/68.5 from 65/66 on