Bumi Resources eyes asset sales, rights issue to raise cash

By Fergus Jensen and Saeed Azhar

JAKARTA/SINGAPORE, Oct 2 (Reuters) - Indonesia's biggest coal firm Bumi Resources , facing a probe into its finances by London-listed Bumi Plc , a major shareholder, is considering selling mines and carrying out a rights issue to raise cash, officials said on Tuesday.

Bumi Plc, created in a partnership between Indonesia's powerful Bakrie Group and financier Nat Rothschild, announced a probe last week into potential financial irregularities of over $500 million at its Indonesian subsidiaries, driving down the firms' share prices.

It has a 29-percent stake in Bumi Resources, the Bakrie's flagship company.

Bakrie Group firms have already been under heavy investor selling pressure this year because of high-debt costs, with the possibility of a share sale the latest effort to show the group's ability to raise cash to shore up confidence.

"We will not rule out the possibility ... It could be non-premptive. It could also be a normal rights issue," Bumi Resources CEO Ari Hudaya, said at a news conference in Jakarta to respond to the probe.

The firm has for years discussed a non-premptive rights issue, which is a maximum 10 percent sale of the enlarged share capital that does not require shareholder approval, although any sale could further hit a stock price already down 67 percent this year.

The Bakrie Group, which has previously run into debt problems, including a default during the 1997-1998 Asian crisis, has said it was looking to sell assets to repay high interest loans to creditors such as China wealth fund CIC.


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Dileep Srivastava, Bumi Resources' investor relations director, said the firm could sell assets outside its key coal mines, KPC and Arutmin on Borneo island, which are among Indonesia's richest. The asset sales had been discussed before the latest probe, which Srivastava described as an "attack".

"Bumi Resources has undergone a reasonably unclear, and it seems to be, a motivated attack. We don't know who is behind it and what is the motivation," Srivastava said, without specifically addressing the allegations in the probe.

Sources have told Reuters that an unidentified whistleblower gave documents to Bumi Plc directors, leading to the probe.

The investigation will weaken Bumi Resources' position in capital markets in the next year, Standard & Poor's Ratings Services said on Sept 26 when it cut its credit rating one notch to B plus from BB minus.


Srivastava confirmed a Reuters story in August that the company was in talks for the sale of its 50 percent stake in coal miner PT Fajar Bumi Sakti, a deal that sources say could be worth around $200 million.

Other possible assets that could be sold included miner PT Pendopo Energi Batubara, which has low-grade coal assets in Sumatra, and metal explorer PT Bumi Resources Minerals , he said.

"There are people who are interested but it's probably not the right time," Srivastava said about Pendopo, given this year's commodity downturn has hurt coal prices.

Any sale of Bumi Resources Minerals, which has a share in Newmont Mining Corp's huge copper and gold mine in Indonesia, zinc assets in Sumatra, plus iron ore and diamonds in Africa, could be worth $1.5 billion, though Srivastava implied the firm could try to sell individual mines.

"These are our monetising plans. The plans are immediate but they are subject to market conditions -- we are not in the distressed market," he said.

The Bakrie Group, whose patriach Aburizal Bakrie is a contender to become Indonesian president in 2014, said on Monday its investment firm Bakrie & Bros had agreed to a plan with creditors to repay a $437 million loan arranged by Credit Suisse that fell into a covenant breach in April.

Sources say assets have been put up as collateral on that loan. The family could also sell other non-listed assets outside the resource sector, the sources said. The family has interests in plantations, property, energy, infrastructure and soccer.

"They have effectively provided their stake holdings in four non-core assets," said one of the sources familiar with the talks, who declined to be identified. "The collateral pool has been bolstered as a result of that."

Bumi Plc has commissioned London law firm Macfarlanes to investigate the alleged financial irregularities.

It is the latest problem to plague Bumi, listed in London last year via a reverse takeover engineered by Rothschild, the 41-year-old scion of the centuries-old European banking dynasty, in a $3 billion deal with the Bakrie family.

They aimed to create an international coal-mining titan with mines in Indonesian Borneo, and one of the biggest listed companies on the London exchange.

But the partnership has steadily unravelled. Rothschild's influence has waned since his role as co-chairman ended in March following public rancour with the Bakries and Bumi's new chairman, Samin Tan. The Bakries and Tan own 47 percent.

The Bakries now face a potential split with Tan, sources say, after he pulled the Bakrie Group from the brink of default by investing $1 billion in Bumi Plc - an investment now worth around $150 million.

(Additional reporting by Andjarsari Paramaditha and Janeman Latul in Jakarta; Writing by Neil Chatterjee; Editing by Neil Fullick)

((neil.chatterjee@thomsonreuters.com)(+ 62 21 3199 7170))