PT Bakrie offers Bumi Modern shares
JAKARTA (JP): Financing company PT Bakrie Finance Corporation said on Wednesday that it planned to swap part of its Rp 1.6 trillion (US$197 million) debt for shares in its publicly listed affiliate PT Bumi Modern.
President of Bakrie Finance Mustafa I Jatim said that several creditors had given their initial agreement for the debt-to- equity-and-assets swap proposal.
"Some creditors preferred settling Bakrie's debt through Bumi Modern's shares instead of having to exercise their rights to seize Bakrie's assets," Mustafa said during a media briefing at the Jakarta Stock Exchange.
Bumi Modern, a tourism, hotel and oil concern, is a subsidiary of Bakrie Finance's parent company PT Bakrie Capital Indonesia.
Under the complicated debt restructuring proposal, Bakrie Finance plans to pay part of its debt or about Rp 915 billion with its claims on third parties.
Mustafa said that because the claims had been taken over by parent company PT Bakrie Capital Indonesia, the latter would be responsible for paying the Rp 915 billion debt by issuing convertible bonds for the same amount to Bakrie Finance's creditors.
He said that the bonds would be converted into Bumi Modern shares.
Bakrie Finance owes some Rp 434 billion to 13 domestic creditors, some of which have been taken over by the Indonesian Bank Restructuring Agency (IBRA), and another Rp 42 billion to six affiliated creditors.
He said that the creditors preferred to accept Bumi Modern's shares because this presented a better alternative to the other assets belonging to Bakrie Finance.
"We have assets spread all over the country. I am not kidding if I tell you that we have tractors in South Kalimantan and even in Irian Jaya," he said.
The creditors also based their choice on the recommendation for a debt-to-equity-and-assets swap given by auditor PricewaterHouseCoopers, which conducted a due diligence on Bakrie at the latter's request.
Mustafa said that Bakrie Finance's foreign debt amounted to between $120 million and $130 million or the equivalent of Rp 1.14 trillion.
The company last month survived a bankruptcy petition brought by four Hong-Kong based creditors after the Supreme Court overruled its earlier decision that declared Bakrie Finance bankrupt.
Mustafa said that the company was offering creditors its entire assets to pay its remaining debts of about Rp 685 billion.
"A creditor may ask for one tractor, one ship and shares worth US$1 million," he told The Jakarta Post.
He said that the company expected to hold a meeting with its creditors by the end of this month or in September to establish the term of reference for initial approval of the debt-to-equity -and-assets swap.
Bumi Modern's rights issue earlier this year was shrouded in controversy when it raised some Rp 9 trillion to acquire oil company Gallo Oil Ltd of the United Kingdom.
Analysts questioned the plan as Bumi Modern's total assets constituted only about five percent of the rights issue proceeds.
Furthermore, Gallo Oil is owned by a company linked to businessman Aburizal Bakrie, the majority shareholder of Bumi Modern.
Analyst Lin Che Wei has said that the acquisition of the oil company was a ploy to transfer its assets into liquid securities through "manipulated pricing" on the JSX.
According to him, Bakrie would then be better placed to pay its debts using its Bumi Modern assets, whose book value inflated following the acquisition.(bkm)