December 25, 2008 / 9:41 AM / 10 years ago

UPDATE 2-Indonesia Bakrie says settles debt in Bumi deal

(Recasts lead, adds details, quotes, background)

By Sara Webb

JAKARTA, Dec 25 (Reuters) - Indonesia’s heavily indebted Bakrie & Brothers, which owns stakes in plantations, telecoms, coal, and property firms, said it had solved its debt problem following a deal with private equity firm Northstar Pacific.

The deal with Northstar follows weeks of uncertainty over how the politically connected Bakrie & Brothers (BNBR.JK) would repay $1.2 billion of group debt, at a time when investors were pulling out of Indonesia and other emerging markets amid a global financial crisis and credit crunch.

The Bakrie group is controlled by the family of Indonesia’s chief social welfare minister Aburizal Bakrie who, until the recent financial-market shake-out, was ranked as Indonesia’s richest man.

The Northstar deal “solved the outstanding debt problem,” said Nalin Rathod, president director of Bakrie & Brothers, in a press statement on Thursday.

Bakrie & Brothers’ debt has now been halved to the equivalent of $627 million, the group said, following deals with various investment firms which have repaid or taken over Bakrie loans in exchange for shares in Bumi Resources (BUMI.JK), Indonesia’s biggest coal miner and the Bakrie group’s prize asset.

Bakrie & Brothers and Northstar have agreed to set up a 70-30 joint venture, which will own a 21.4 percent stake in Bumi, the group said in its statement.

Northstar could not be reached for comment, but the investment firm had previously said it was in talks with Bakrie & Brothers to take over some of the group’s debt in exchange for a significant stake in Bumi.

SELL-OFF

On Wednesday, the Bakrie group said one of its creditors, Oddickson Finance, had agreed to sell $575 million of Bakrie debt to Northstar.

It also said that hedge fund Brentwood Ventures Ltd had paid off another group debt, of $150 million, to Indian lender ICICI Bank (ICBK.BO) in exchange for Bumi shares, adding that 1.3 billion Bumi shares had been pledged against that loan.

Bumi shares closed at 920 rupiah on Wednesday, valuing the 1.3 billion shares at about $110 million and representing a stake of nearly 7 percent in the miner.

Last month, Indonesian private equity firm Ancora Capital Management (Asia) took a stake of up to 5 percent in Bumi, when it acquired shares held by JP Morgan as collateral against a loan to the Bakrie group of $70-100 million.

Fears about the Bakrie group’s debts, coupled with the bursting of the commodity bubble and global market sell-off, hit Bumi’s share price, which plunged from an all-time high of 8,750 rupiah to a 2008 low of 640 rupiah in November, or less than one-tenth of the peak value.

Bakrie group said in its statement that following the deals, it had a $197 million debt, a 425 billion rupiah ($39 million) debt, and a convertible bond valued at 4.26 trillion rupiah ($391 million).

Bakrie & Brothers owns 42.6 percent of PT Bakrie Sumatera Plantations (UNSP.JK), 48.3 percent of PT Bakrie Telecom (BTEL.JK), 14.8 percent of PT Bakrieland Development (ELTY.JK), and 43.2 percent of PT Energi Mega Persada (ENRG.JK). ($1=10900 Rupiah) (Editing by Andrew Callus)

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