Bumi resources meets investors for bond sale

Bumi resources meets investors for bond sale

Shanthy Nambiar, Bloomberg, Jakarta

The mining units of PT Bumi Resources, Indonesia's biggest coal exporter, are meeting investors this week to gauge demand for the planned sale of US$600 million of bonds, a Bumi official familiar with the offer said.

The bonds will be sold by Bumi's financing unit Indocoal Exports (Cayman) Ltd. on behalf of PT Arutmin Indonesia and PT Kaltim Prima Coal, said the official, who declined to be named. The bonds may be priced in New York in the week of June 20 after meetings with investors in Asia, Europe and the U.S.

Indonesian borrowers including PT Indosat, the nation's second-biggest phone company, are taking advantage of a decline in borrowing costs during the past three weeks, as concern eased that General Motors Corp. and Ford Motor Co. would swamp the market for high-yield debt.

"Everyone is trying to pick the lowering in the yield," said Desmond Soon, who manages $200 million of debt at Pacific Asset Management in Singapore.

"High-risk paper is coming back, but slowly."

The yield on the benchmark 10-year U.S. Treasury note due May 2015 was 4.08 percent as of 9:15 a.m. in Singapore, according to Cantor Fitzgerald LP, a New York-based bond broker.

Merrill Lynch & Co. will manage the bond sale with the help of Jakarta-based PT Danatama Makmur Sekuritas. R.G. Rosso, Merrill's spokesman in Hong Kong, declined to comment. Peter Tabalujan, spokesman at Bumi, also declined to comment. The bonds were marketed to investors in Singapore on Monday.

The proceeds of the sale will be used to settle debt owed to Credit Suisse First Boston and other lenders such as Japan's UFJ Bank Ltd., Bumi's Finance Director Eddie Soebari said on Feb. 28. The debt is held by Arutmin and Kaltim Prima Coal.

General Motors in March forecast its largest loss in 13 years. Within six weeks, Standard & Poor's cut the automaker's credit rating to BB, two levels lower than investment grade, driving yields on emerging market debt higher and delaying more than $2 billion of Asian bond sales.

Junk bonds are rated below BBB- by Standard & Poor's or below Baa3 at Moody's Investors Service.

Arutmin and Kaltim Prima bonds, which are rated a prospective BBB- by Fitch Ratings, will mature in 2012 and are backed by current and future receivables generated from their coal mining production and exports, the rating agency said on June 3.