Bumi, which produces half of the archipelago’s thermal coal exports, is working to advance the new deal with CIC to accelerate its overall debt reduction program, according to Bloomberg News. Indonesia is the No. 1 steam coal producer and supplies mainland China with most of its power station coal.
Bumi officials will swap their $1.3 billion debt, while surrendering a 19% stake in coal-miner unit PT Kaltim Prima Coal, a 42% stake at Bumi Resource Minerals, and $150 million worth of Bumi shares.
The state-owned CIC will accordingly receive $1.36 billion, leaving the firm owing $430 million.
Andrew Beckham, finance director of Bumi, said the remaining debt would be paid over three years at approximately 7% interest, a lower rate than the previous debt deal, which left CIC with 12%.
“We will put the offer to shareholders next month and if they approve, then we will move quickly to finish, possibly by year end,” Beckham said. A debt reduction could save the company up to $216 million in annual interest payments.
Dileep Srivastava, director of Bumi Resources, said the significant reduction in interest expenses could bring the company to a break-even or even to a positive bottom line by Q4 2014.
Beckham, for his part, forecasts improvement in global coal prices and the Indonesian Rupiah’s position against the U.S. dollar to further the company’s financial performance.