Credit Suisse to arrange $1.6 billion loan for Bumi mines purchase

Renaissance Capital asks the market to dig in and help it finance its purchase of Bumi Resources premiere mines.
Indonesian investment company PT Renaissance Capital announced Thursday (May 25) that it is seeking a $1.6 billion term loan to help fund the purchase of two coal mines from mining group Bumi Resources.

In March, Renaissance Capital, which describes itself as an "Indonesian strategic investment house that actively advises, manages and invests in turnaround and high growth business opportunities in Indonesia", agreed to buy the coal assets of Bumi, including 95% of Kaltim Prima Coal (KPC), 100% of Arutmin Indonesia (Arutmin), and 100% of IndoCoal Resources (Cayman) for $3.2 billion.

The loans are broken down into two parts. The first is a $1 billion loan with a five-year maturity and the second is a $600 million loan with a six-year maturity. There will also be a fully subordinate $500 million junior-term loan with a tenor of eight years, but investors have not yet been invited to participate in that loan. The balance of the purchase price for the coal companies will be funded by equity from the buyer.

Credit Suisse is acting as the mandated lead arranger and sole bookrunner for the senior facilities. The bank will launch a roadshow for the loans in the week of June 5.

When the deal to purchase BumiÆs mines was first announced, little was known about Renaissance Capital. The group was founded in 2002 by former senior partners from Deloitte & Touche, Samin Tan and Surjadinata Sumantri along with a number of local and expatriate professionals from Deloitte & Touche from the distressed asset and workout group. Initial capital for Renaissance was sourced from the founding partners.

While the buyers were unknown, BumiÆs original owners are very well known in the archipelago. Bumi is a part of the Bakrie Group, which is controlled by the family of Indonesia's Coordinating Minister for Welfare Aburizal Bakrie. Indeed, some analysts immediately questioned why Bumi would sell.

Profit is one answer. Bumi sold the mining operations for $3.2 billion (the second-largest transaction in Indonesian history, behind last yearÆs record deal by the Sampoerna family when it sold its entire stake in cigarette producer HM Sampoerna to Philip Morris International for $4.6 billion). It paid a mere $149 million for 80% of PT Arutmin from BHP Billiton in 2001; it already owned the remaining 20%. In 2003 it paid $500 million for the entire share capital of KPC from BP and Rio Tinto.

One of the reasons Bumi got the mines for such a low price is that outstanding agreements (signed almost 20 years previously) called for the then foreign owners to eventually divest 51% of their respective companies to local Indonesian investors.

Despite the fact that Bumi was an Indonesian company, the future ownership of Kaltim came under question because Bumi purchased Kaltim through two entities -Sangatta Holdings and Kalimantan Coal - that had foreign investment status. So the East Kutai government, where Kaltim mine is located, claimed the company itself under the 51% divestment rule. But it was never able to raise the money to buy the mine - yet still a cloud hung over Bumi's head.

Since the sale was announced in March, Bumi paired up with oil-and-gas firm PT Energi Mega Persada. The group says it plans to build plants on Borneo or Sumatra that produce diesel from coal and palm oil crops û thus expanding its energy business. It also plans feasibility studies on two gold mines.

Bumi won shareholder approval to sell the mines to Renaissance Capital on May 17 û it will pay a special dividend of Rp190 (2 cents) a share this year using some of the proceeds from the sale.

But the coal business, thanks to ChinaÆs booming demand for it to supply electricity generation, is still steaming along strong. KPC is the largest coal producer and exporter in Indonesia and Arutmin is the fourth-largest coal producer and third-largest exporter, according to the Ministry of Energy and Mineral Resources. Combined, they are the largest producer and exporter of coal in the country, accounting for 37% of the coal exported out of Indonesia last year.

Last year, the coal companies produced and sold approximately 43.7 million gross tonnes of coal, virtually all of which were exported. They booked combined 2005 earnings before interest, tax, depreciation and amortisation of $474 million and net cash of $294 million on net sales revenue of $1.64 billion.
¬ Haymarket Media Limited. All rights reserved.
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