Merrill Lynch has begun roadshows for a landmark $600 million 3.1-year Series-1 future flow securitization for PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia in Hong Kong today. All eyes are on the deal, which will not only mark the first cross border securitization from Indonesia since the financial crisis, but the first stand alone cross-border future flow transaction from Asia as well.
Following presentations in Asia during the early part of this week, the lead will take the deal to investors in Europe at the end of the week, before heading to New York for pricing early next week.
Although, the marketed range has not yet been made public, price talk has the deal looking to price somewhere north of 300bp to 350bp over Libor.
The transaction, issued via special purpose vehicle Indocoal Exports (Cayman) Ltd, will have a Reg-S 114A FRN structure with a legal final maturity of July 2012. The deal will also have a front-loaded amortization schedule, whereby 60% of the principle will be paid in the first three-years and 40% amortized over the remaining four years.
This heavily front-loaded structure is designed to help to mitigate volatility of future coal prices over the longer-term.
The notes, rated BBB- by Fitch, will be backed by all existing and future accounts receivables arising from the sale of coal from KPC and Arutmin.
Pursuant to Indonesian regulations, KPC and Arutmin will transfer their respective rights and responsibilities of their respective coal concessions or Coal Contracts of Work (CCOW) granted by the government of Indonesia over to two newly established Indonesian incorporated SPV's, PT Indocoal Kaltim Resources and PT Indocoal Kalsel Resources. Both are wholly own subsidiaries of PT Bumi Resources.
The seller parties will then enter into a seven-year coal supply contract with the Cayman Island SPV, Indocoal Exports, whereby the SPV will then sell the coal it purchases directly to obligors. To fund the purchase of the receivables, Indocoal will sell the securitized notes to capital market investors.
Kaltim and Arutmin are the second and fourth largest coal producers in the country, respectively and account for some 29% of Indonesian coal production. Both are subsidiaries of PT Bumi Resources. Combined, they generated $1.1 billion in net sales last year, with an operating income of $2.93 million. As of March 31, Kaltim and Arutmin had a combined proven and probable marketable reserve of 959mt.
In February, Bumi hired Merrill Lynch to advise on its funding plans in order to facilitate a further expansion its mining operations. Bumi is hoping to be in a position to take advantage of the robust coal prices and demand in the region from the rising number of coal-fired power plants, especially in China.