CLSA Bumi Resources (BUMI IJ) update

Deadline for the new share issue without pre-emptive rights for a 10% stake is end of this month. Stock has risen recently, partly helped by talk that a buyer could still be found at the minimum price of Rp2366/share, still a 9% premium over current price (but a 40% premium over 2 weeks ago). Bumi is maintaining its non-preemptive rights issue at Rp2366/share. This issuance is slated to raise US$495.89m, from selling 10% new shares. The book-building will close on 30 Sep 10. The four standby buyers for this issue originally were reportedly its existing lenders such as JP Morgan, Country Forest (subsidiary of CIC), Raiffeisen Zentralbank Osterreich and Credit Suisse, although Raiffesen had recently claime it is not interested. Comment: CIC is also unlikely to subscribe, in our view, as its current debt-like terms with Bumi already offers good interest and return with low risk. Note that Bumi has short-term debt maturity amounting US$665m as of 1H10, plus >US$100m puttable convertible bond due in Oct 10 and another US$375m puttable convertible bond due in May 11. This non-preemptive issue is obviously crucial for the company. The company is also supposed to get US$200mn cash receipts from its recent asset sale booked in 1H10 and another US$200m from Bukit Mutiara, parent of Berau. Remains to be seen how Bumi could secure these funds, a success could be a catalyst.