Bakrie mulls IPOs for subsidiaries to repay debts

Ika Krismantari, THE JAKARTA POST, JAKARTA | Wed, 01/28/2009 11:19 AM  

Embattled PT Bakrie & Brothers, an investment holding of the politically wired Bakrie family, is planning to sell units via initial public offerings (IPOs) to repay debts. 

The company will take these measures should its plan to sell Rp 4.26 trillion (US$384 million) worth of convertible bonds to Northstar Pacific Partners fail to get approval  from shareholders and regulators, according to Bakrie & Brothers director Ari S. Hudaya on Tuesday. 

Bakrie & Brothers is due to have a meeting of shareholders to get the go-ahead in April or May.

“The Bapepam-LK (Capital Market and Financial Institution Supervisory Agency) and the shareholders must approve the issue. There’s a possibility we won’t get the go-ahead. If this happens, the restructuring will take more time,” he said. 

“But we have prepared several options (to settle the debts), including from dividend flow (of Bakrie subsidiaries), an expectation of higher prices on our stocks and IPOs for our non-publicly listed companies.” 

While refusing to name the companies ready for the IPOs, Ari merely hinted that the units would include those in the infrastructure and construction sectors. 

Bakrie & Brothers non-publicly listed units include among others PT Bakrie Pipe Industry, PT South East Asia Pipe Industries, PT Seamless Pipe Indonesia Jaya, PT Bakrie Construction, PT Bakrie Corrugated Metal Industry, PT Bakrie Building Industries and PT Bakrie Tosanjaya. 

Bakrie & Brothers will issue the Rp 4.26 trillion bonds to Northstar as a standby buyer that will be convertible into as many as 42.6 billion shares, equal to a 31 percent stake in Bakrie & Brothers, at a price of Rp 100 to Rp 110 a share. 

The deal with Northstar, a local arm of US buyout company Texas Pacific Group, is to help Bakrie & Brothers restructure debts and retain control of its main bread and butter earner PT Bumi Resources -- Asia’s largest thermal coal exporter. 

The bonds, scheduled for issue in May and to be converted into shares by the end of the year, will then replace a Rp 4.26 trillion loan the company owes to Northstar. 

Northstar helped Bakrie to settle $575 million of debt to Odickson Finance, a subsidiary closed to Gunawan Yusuf’s Sugar Group Companies, last December linked to a deal  whereby Bakrie should issue  bonds. 

Bakrie & Brothers minority shareholders are concerned their stake may be diluted due to these steps. 

Ari, however, said the company would stick to its initial plan to sell convertible bonds as this move was thought to be more beneficial to shareholders than the sale of assets. 

Bakrie & Brothers is scheduled to submit the bond proposal to Bapepam-LK in February at the latest. 

“Amid the current market conditions, I doubt whether it’s a good time for the bond issue. But Northstar is ready to be the standby buyer,” said Ari. 

In response to the recent controversy over Bumi’s purchases of coal producers PT Pendopo Energi and PT Fajar Bumi Sakti, and mining service firm PT Dharma Henwa for a combined Rp 6.1 trillion, Ari insisted that these purchases must proceed despite the current investigations by Bapepam. 

Ari, who is also Bumi’s president director, dismissed allegations that these acquisitions might be bogged down by conflicts of interest and concern over possibly overvalued selling prices. 

Bapepam chairman Fuad Rahmany said Tuesday the regulator was investigating the deals to see whether they were substantial enough to require Bapepam approval. 

Bumi’s purchases will be financed by 70 percent loans and 30 percent from equity, according to Ari.