SINGAPORE/JAKARTA Indonesia's Bakrie Group is set to announce a deal led by Indonesian investors PT Renaissance Capital by Tuesday to avert a default on a $1.345 billion loan after talks with commodity giant Glencore (GLEN.L) fell through, three sources with direct knowledge of the deal said on Monday.
Renaissance Capital, led by Indonesian investor Samin Tan, is expected to provide financing to reduce the debt by $1 billion in exchange for an equity stake in London-listed coal miner, Bumi Plc BUMIP.L, said one of the sources, who declined to be identified because the talks were not public.
The source said Indonesian coal miner Borneo Lumbung Energi (BORN.JK), controlled by Tan, may get the stake in Bumi Plc, effectively becoming another holding firm, though the structure of the Bakries' latest deal was not clear.
The deal, which would keep control of the Bakrie Group's world-class mines in Indonesian hands, is part of its attempts to refinance the loan it obtained in March this year to consolidate its debts. Credit Suisse (CSGN.VX) arranged the debt against the Bakrie Group's 47 percent stake in Bumi Plc, and lenders included the Swiss bank and a group of hedge funds.
Glencore is no longer in talks with the Bakrie Group, two sources told Reuters, after having been the frontrunner ahead of rival trader Vitol VITOLV.UL in a deal to provide a loan in exchange for greater commodity marketing rights.
It was not clear why the Glencore deal fell through. Glencore, which already markets Bumi coal, was interested in refinancing, but did not want an equity stake, a source familiar with the matter said. It is also unclear if there are other investors behind Renaissance.
"Going from Glencore to the Renaissance fund makes the deal seem questionable," said a Jakarta-based equity analyst, who declined to be identified.
Glencore, the world's biggest diversified commodities trader, has a market value of $50 billion and has the funds to finance big deals. PT Renaissance is unlisted and Samin Tan's indirectly controlled Borneo Lumbung has a market value of $2 billion, a little below Bumi Plc's $2.2 billion.
Officials with the Bakrie Group declined to comment, while officials with Glencore were not immediately available to comment. Officials with Renaissance Capital could not be reached.
Shares in Bumi Plc slipped 0.7 percent in London by 0918 GMT (5:18 a.m. EDT), while Jakarta-listed Bumi Resources (BUMI.JK) fell 4.1 percent and the group's holding firm, Bakrie & Bros (BNBR.JK), slipped 1.9 percent, as equities fell across Asia.
Bumi Resources' share price has been weighed down by investor concerns over high debt levels and transparency. Indonesia's stock exchange said last year it would fine three Bakrie firms, including the family's holding firm Bakrie & Bros, for failing to explain discrepancies in their financial reports.
The London-listing, a joint venture between the Bakries and billionaire financier Nathaniel Rothschild, was meant to bring greater corporate governance and better access to capital.
But a sharp decline since June in the share price of Bumi Plc amid falling equity markets triggered the mandatory repayment of the one-year $1.345 billion loan that had been due to mature in March 2012.
The deal with Renaissance was expected to be signed on Monday, the sources said. Sources said Tan's Renaissance controls Borneo Lumbung Energi, the only Jakarta-listed coking coal miner, and had tried to buy stakes in Bumi's key thermal coal mines several years ago.
Borneo Lumbung Energi is 75 percent owned by PT Republik Energi & Metal, according to Reuters data.
The Bakrie Group, which also saw off debt crises in 1998 and 2008, is one of largest conglomerates in Indonesia, Southeast Asia's biggest economy, with interests in property, energy, plantations, coal and telecoms.
The family is headed by Aburizal Bakrie, chairman of Indonesia's Golkar Party and whom many analysts believe will run for president in 2014.
Bumi is the largest coal exporter of thermal coal and also one of the fastest growing as it cashes in on demand from utilities in India and China. It expects output to jump to 140 million tonnes by 2014 from an expected 86 million this year.
(Additional reporting by Janeman Latul, Fathiya Dahrul and Andjarsari Paramaditha in JAKARTA, and Clara Ferrara Marques in LONDON; Editing by Matt Driskill)