TPG’s Indonesia Affiliate, Bakrie to Control Bumi

By Leony Aurora

Nov. 29 (Bloomberg) -- TPG’s Indonesian affiliate and PT Bakrie & Brothers will form a venture to control PT Bumi Resources in a deal that will help Bakrie pay debt raised by pledging shares of Asia’s biggest exporter of power-station coal.

Northstar Equity Partners, the Indonesian affiliate of U.S. buyout firm TPG, will take over $575 million of Bakrie & Brothers’s debt as part of the transaction, Bakrie & Brothers President Director Nalinkant Rathod said in a briefing in Jakarta late yesterday.

The agreement will enable Bakrie & Brothers, controlled by the family of Welfare Minister Aburizal Bakrie, keep a stake in its biggest unit. The investment company said on Oct. 31 it will sell its 35 percent stake in Bumi to Northstar to raise $1.3 billion. The value of the stake has since plunged 56 percent to $566.8 million.

“It’s a first step toward resolving Bakrie’s debt and that should be positive,” said Cholis Baidowi, who helps manage about $124 million at PT Trimegah Securities in Jakarta. Still, without knowing how much of Bumi’s stake Northstar will obtain from the deal, it’s difficult to assess the impact on the coal miner’s share price, Baidowi said.

Pledging Shares

Bakrie & Brothers, which planned to repay $1.2 billion of debt raised pledging shares of Bumi and other units, has paid $200 million of the debt “partly with shares,” Rathod said. Bakrie will pay an additional $200 million by the end of 2008. Northstar will pay $575 million to Odickson Finance SA and own the shares pledged to the creditor, he said.

The balance of the debt is covered by a foreign-exchange transaction gain, Rathod said without giving details.

“All Bakrie & Brothers problems are resolved” with the new agreement, Rathod said. “Before year-end, we’ll know the composition of Bumi’s shares to be owned by Northstar and Bakrie.”

There’s no option for Bakrie & Brothers to buy back the shares, he said.

Bumi climbed 9.8 percent to 1,010 rupiah in Jakarta trading after falling as much as 6.5 percent.

Bakrie & Brothers borrowed $1.39 billion and 560.8 billion rupiah ($46 million) between April and October. Some creditors have sold the coal producer’s shares as the price dropped.

The sale of pledged shares after the stock price plunged may mean Bakrie & Brothers now owns less than 35 percent of Bumi.

To contact the reporter on this story: Leony Aurora in Jakarta at laurora@bloomberg.net.