KPC receives largest loan since 1997 economic crisis

Johannes Simbolon, Jakarta Post, Singapore

Giant coal producer PT Kaltim Prima Coal has secured a US$385 million loan from a bank syndicate to refinance its debt, marking the revival of the foreign financial institutions's trust in local companies.

Helman Sitohang, the head of the Indonesia, Malaysia and Thailand office of Credit Suisse First Boston (CSFB), said it was the largest loan ever received by an Indonesian firm in a single transaction since the economic crisis hit the country in 1997, paralyzing most of the nation's companies and making Indonesia's corporate sector the pariah of foreign financial institutions for years.

The CSFB is the sole arranger of the loan, which is provided by a total of 24 financial institutions, including BN Paribas, Bank of Tokyo Mitsubishi, West LB, Bayerische Hypo-und Vereinsbank AG, Bank of Chinatrust, Bank Internasional Indonesia, Moskow Narodney, RBZ.

"Not only demonstrating the trust of the financial sector in KPC and its holding company PT Bumi Resources, the signing of the loan agreement reflects the confidence of the financial sector in Indonesia in general," Helman said, after the signing of the agreement.

He said confidence had been growing during the administration of President Megawati Soekarnoputri, and was now being strengthened by the peaceful elections.

KPC was formerly owned by Anglo-Australian mining giant Rio Tinto and British energy giant BP Plc before Bumi Resources, controlled by the Bakrie family, bought out the firm last year for $500 million. Publicly listed firm Bumi also owns PT Arutmin Indonesia, which is based in South Kalimantan.

Both firms are expected to produce 40 million tons of coal this year, up from less than 30 million tons last year. In 2007, Bumi targeted its combined output at 70 million tons, making it the world's largest coal firm.

KPC was valued at about $820 million when it was acquired by Bumi from Rio Tinto and BP last year. Now, according to KPC's director Eddie S. Soebari, the value of Bumi has increased to $1.9 billion, given the increase in its production, reserves and the rising coal price.

Helman admitted that KPC's performance and potential had attracted financial institutions to the extent that CSFB could arrange the syndicated loan in about three months, which was quite a short time by industry standards.

KPC will use the $385 million loan to refinance the debt arising from the acquisition of the firm by Bumi from Rio Tinto and BP. The debt is actually due three years from now, but KPC decided to refinance the debt in order to cut costs.

The new loan, which has a grace period of 2.5 years, has an interest rate of 4 percent above the London inter-bank offered rate (Libor) or about 6 percent at present. In comparison, the old loan had a interest rate of 12 percent. This will allow KPC to save interest costs of $25 million per year.

"The signing of the agreement is another important step in strengthening our balance sheet and enhancing our financial efficiency," Bumi's president Ari S. Hudaya said.