Bakrie brothers close to deal with Glencore over Bumi
Friday 14 October 2011
Glencore, the world's biggest commodities trader, is in advanced discussions to lend Indonesia's Bakrie brothers about $900m (£572m). The deal could give the Swiss-based, London-listed trader a stake and preferential trading rights in Bumi, the Indonesian coal company formed by the brothers and the financier Nat Rothschild.
Although the brothers are in talks with several potential saviours, sources indicated last night that they were most likely to strike a deal with Glencore.
The brothers, who own 47 per cent of London-listed Bumi, desperately need to raise cash after breaching the terms of a $1.35bn loan arranged by Credit Suisse. The Bumi stake was used to back the loan and became insufficient as collateral after plunging commodity prices dragged down shares in Bumi by a third since the end of June.
Under the terms of the deal being discussed, Glencore would help the brothers refinance their loan in return for additional rights to trade coal produced by Bumi, which is sitting on about £3bn tonnes of reserves. It could also have the option of turning the loan into shares in Bumi if Bakrie Group cannot repay the debt. Furthermore, Glencore could pick up additional marketing rights to other Bakrie assets, such as zinc and copper.
The brothers were also in talks with Vitol, another major commodities trader that has a huge presence in the oil industry and is seeking to grow its coal operation, about an alternative deal.
All parties declined to comment. Indonesia is the world's largest exporter of thermal coal, which is used mainly as fuel for power stations and is increasingly in demand from India and China.
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