Berau Coal’s 12.5 percent $450 million bonds fall due on Wednesday, and while there has been no official statement on whether the bonds will be redeemed on schedule, bondholders are expecting the issuer to enter a stay under the Singapore courts before resorting to a similar scheme in Indonesia for the whole business.
According to a bondholder, the Indonesian coal miner is expected to make use of Singapore statute 210(10), which protects issuers from any further proceedings against them while issuers and creditors work out a compromise. Entering that scheme requires approval from 75 percent of bondholders.
Berau’s 2015s were last seen at 62/64 and its 2017s at 60/62, though a trader said the last trade in the 2015s was in late June at 63.25. “The holders are sitting back,” said a trader. “Until three or four weeks ago, there were only buyers.” Sinarmas-backed Asia Coal Energy Ventures (ACE) on July 1 won control of Asia Resource Minerals, the parent of Berau Coal, but has not been specific about its plans to restructure Berau’s outstanding debts. It said earlier that it had a bridge loan facility on hand if it needed to make the redemption payment, but also said it expected to restructure the 2015 bonds, together with $500 million 7.25 percent bonds due 2017, on “substantially similar” terms to those proposed by ARMS.
ACE previously said that ARMS’ proposal to enter a scheme of arrangement in Singapore alone might be open to legal challenges, since Berau’s business and assets are in Indonesia, adding that including a Penundaan Kewajiban Pembayaran Utang (PKPU) under Indonesian law would give more certainty. A PKPU suspends a debtor’s payment obligations while it discusses restructuring with creditors.
ACE has never given precise details of its bond restructuring proposal, but ARMS had previously offered to exchange the 2015s for new notes maturing in July 2019 and the 2017s for new notes due December 2020. The new notes were to pay monthly coupons of 6.75 percent for the first 18 months, of which 3.0 percent would be in cash and 3.75 percent payment in kind; 7.5 percent for months 19-30, comprising 3.5 percent in cash and 4.0 percent PIK; 8.0% for months 31-42, comprising 4.5 percent in cash and 3.5 percent PIK; 8.25 percent paid entirely in cash for months 43-54; and 9.0 percent paid in cash thereafter.
The proposal by ARMS is no longer on the table, following the ACE takeover, which is in the final stages of completion. (Reporting by Daniel Stanton; Editing by Vincent Baby)