Bumi saves $320 million from debt refinancing

Bumi saves $320 million from debt refinancing

Leony Aurora, The Jakarta Post/Jakarta

Indonesia's largest coal producer PT Bumi Resources will save at
least US$320 million from the debt refinancing of its two mining
units, a company executive says.

Bumi's chief financial officer Eddie Soebari said the publicly
listed firm would save millions of dollars in interest costs
after its subsidiaries, PT Kaltim Prima Coal (KPC) and PT Arutmin
Indonesia, pay off their debts with proceeds from a recent $600
million bond sale.

"Our cash flow will benefit in the amount of $20 million each
quarter for the next four years (from the debts refinancing),"
Eddie said on Friday.

The dollar-denominated bonds, which will mature in seven
years, were priced at 7.13 percent on Wednesday afternoon in New
York.

"They save 100 basis points for KPC and 200 basis points for
Arutmin (from the existing financing)," president of Merril
Lynch's Indonesian chapter Roger Suyama said in a separate
interview.

Merril Lynch and local PT Danatama Makmur work as joint lead
managers for the deal.

Eddie said that out of the bonds proceeds, $442 million would
be used to pay off KPC and Arutmin's debts, while about $102
million would be used to strengthen working capital and fund
expansions.

"We will maintain our production growth rate at between 20
percent and 21 percent annually for the next seven years," he
said.

Combined, KPC and Arutmin produced 40 million tons of coal
last year, about a third of the country's total output.

To increase production, the companies would allocate about $25
million and up to $8 million, respectively, a year for capital
expenditure, Eddie said.

"We will not borrow any more money during the bonds' tenure,"
he said. "The proceeds from the bonds sale is enough to cover our
development plans."

He said the successful bond sale -- the largest single tranche
by a local private company since the crisis -- reflected the
return of foreign investors' confidence in the company.

The bonds are rated BBB-, which is the lowest investment grade
and four notches above Indonesia's sovereign rating, by
international agency Fitch Ratings.

According to Suyama, the overall demand for the bond issue was
at least 50 percent higher at $900 million.

The acquisition of KPC two years ago turned Bumi into the
country's largest coal producer, supplying more than 6 percent of
thermal coal available in the international market.

KPC has mines in East Kalimantan, while Arutmin produces its
coal from South Kalimantan.

Global coal prices have soared to record highs during the past
two years as growing demand, particularly from China,
overshadowed supply.

According to Bloomberg data, average prices for coal sold by
Bumi in the first quarter of this year rose to $38.6 a metric ton
from an average of $31.8 a metric ton throughout 2004.