PT Bakrie offers Bumi Modern shares

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)