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Indonesian investor in $700M equity swap

JAKARTA -- Indonesia investment company Bakrie & Brothers plans to swap some of its debt for shares worth up to $700 million or equal to 30% of paid up capital through non preemptive rights. This will dilute the Bakrie family's control of the the company. 

Aburizal Bakrie (center), chairman of the Golkar party, speaking alongside Prabowo Subianto from Gerindra Party (right) in a campaign in July 2014 in central Jakarta.

     Finance Director of Bakrie & Brothers, Eddy Soeparno told Nikkei Asian Review that about 60% of their lenders have agreed to swap the debt for cash and shares. "We are still in discussion to decide the price of new shares. I hope we can complete the whole debt restructuring before July," he said. A debt to equity swap is a refinancing deal where the debtholder gets an equity position in exchange for cancellation of the debt.

     Bakrie's $800 million debt is mostly owed to Credit Suisse ($280.7 million), Japan's Mistubishi Corporation ($149.9 million) and Singapore's Eurofa Capital Investment ($109.0 million).

     The debt problem has been causing headaches for the group. In 2012, Bakrie & Brothers and Long Haul Holdings, which is also controlled by the Bakrie family, secured a loan facility of $1.34 billion from a bank consortium led by Credit Suisse to acquire 47.6% shares in London-based miner Asia Resourcer Minerals (formerly Bumi PLC) from Vallar Investment UK owned by Nathaniel Rothschild.

     After disputes over debt restructuring, Bakrie Group agreed to sell all its shares in Bumi to local coking coal producer Borneo Lumbung Energi & Metal, which is owned by tycoon Samin Tan, and use the proceeds to pay back part of their debt to Credit Suisse. 

     Bakrie & Brothers is controlled by powerful tycoon Aburizal Bakrie, who is also the Chairman of the Golkar Party. He owns about a 30% stake in the company through Credit Suisse AG, Singapore Branch S/A Bright Ventures Pte Ltd and Mel Bk NA S/A Mackenzie Cundill Recovery FD. 

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