Valco Plans to Make Rival Offer to Buy Bakrie’s Debt

By Leony Aurora

Dec. 19 (Bloomberg) -- Valco Corp., an Indonesian energy company, plans to make a rival bid to buy PT Bakrie & Brothers’ debt and take shares of PT Bumi Resources that were pledged as collateral for the loans.

Valco, which is leading a group including Middle Eastern investors, is in talks to purchase the debt from Odickson Finance SA, Muhammad Hadi Bil’id, Valco’s chief executive officer, said today in Jakarta. He declined to give details.

An offer from Valco would compete with a bid from Northstar Equity Partners, the Indonesian affiliate of U.S. buyout firm TPG, which agreed this month to take over $575 million of debt from Odickson and form a venture with Bakrie & Brothers that would gain control of the Bumi shares.

“A lot of people are interested in Bumi’s assets that are currently undervalued,” said Lanang Trihardian, head of research at PT Syailendra Capital, which manages about $50 million. Even so, “the situation is fluid and it is difficult to predict the course of developments; one has to be careful.”

Bumi is Asia’s biggest coal exporter and produces more than a quarter of the fuel in Indonesia. Profit excluding one-time items almost doubled in the first nine months to $490 million from a year earlier on higher prices, Dileep Srivastava, head of investor relations at Bumi, said on Dec. 1.

No ‘Hit-and-Run’

“We are still in negotiations” with Odickson, Bil’id said in a telephone interview today. “We’re an energy company, it’s not going to be a hit-and-run” investment, he said.

Bakrie & Brothers has repaid some of the $1.1 billion it borrowed from Odickson in April. The company pledged stock as collateral for the loans, including 4.1 billion shares in Bumi, equivalent to a 21.2 percent stake.

The value of Bakrie & Brothers’ 35 percent stake in Bumi fell 78 percent to $541 million in three months as coal prices dropped and some investors dumped the shares on concerns that the Indonesian investment company won’t be able to pay the debt.

“The priority for us is to finalize the terms of strategic partnership with Northstar,” Srivastava, also a director at Bakrie & Brothers, said today. “Other things are, unfortunately, not a priority and can disturb the positive advancing process.”

Patrick Walujo, managing director of Northstar, didn’t respond to calls and a mobile-phone text message seeking comment. Bakrie & Brothers said this month it expected to complete talks with Northstar by Dec. 24.

Valco has a coal concession that hasn’t started production in South Sumatra province and is in talks to buy stakes in four oil and gas fields from PT Medco Energi Internasional, Bil’id said.

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