Latest....good news??16 Jan 2015 11:24
Berau Said to Seek to Extend 2015 Notes’ Maturity, Reduce Coupon
By David Yong Jan 16, 2015 10:48 AM GMT
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PT Berau Energy Coal (BRAU) is seeking to extend the maturity of its 2015 dollar bonds and cut the coupon to ease a cash crunch amid a boardroom tussle for control of the group, a person familiar with the matter said.
Indonesia’s fifth-largest coal producer plans to repay some of the $450 million of notes upfront and the balance in 2017, the person said, asking not to be identified because the details are private. It also plans to ask bondholders to reduce the debentures’ coupon to below 10 percent from 12.5 percent. In addition, the debt restructuring proposal will include an option to issue payment-in-kind notes in lieu of interest, the person said.
The restructuring is a second attempt by Jakarta-based Berau to refinance the bonds after it postponed a plan to sell new five-year notes in August because of “adverse market conditions.” Berau will run out of money in 2 1/2 years based on its cash-burn rate in the first nine months of 2014, according to CreditSights Inc.
The company will hold a conference call for bondholders at noon London time on Jan. 20, according to a notice published on its website today.
Its 2015 notes gained 0.6 cents to 47.7 cents on the dollar as of 6:38 p.m. in Hong Kong, Bloomberg-compiled prices show. The notes, sold at 100 cents on the dollar in June 2010, slumped 56.7 cents last year. Benchmark coal prices in Asia tumbled more than 25 percent in 2014 to the lowest level in five years.
‘Very Critical’
“Coal prices continued to decline in the fourth quarter, so the pace of cash burn may have worsened,” Sandra Chow, a Singapore-based high-yield analyst at CreditSights, said Jan. 13. “The refinancing is very critical, given the cash burn, the large size of the bond and the limited funding channels at present.”
Asia Resource Minerals Plc, which owns about 85 percent of Berau, hired Houlihan Lokey as restructuring adviser in November as a boardroom spat deepened. It has asked shareholders to reject former chairman Samin Tan’s bid to wrest control of the board at a Feb. 4 meeting in London.
The U.K. company has warned of a possible default on the 2015 notes because Tan’s plan would add “significant uncertainty” to its debt restructuring efforts.
Berau’s planned refinancing is also complicated by a surge in borrowing costs this month amid heightened default risks. The yield on speculative-grade corporate bonds in Asia rose to 8.11 percent on Jan. 15 from about 7.20 percent five months ago, an index compiled by JPMorgan Chase & Co. shows. That’s the highest level since September 2013.
Standard & Poor’s cut Berau’s rating on Nov. 7 by two steps to CCC+ with a negative outlook, citing re
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