Is Widjaja Takeover of Berau Really Good News for Bondholders? -- Market Talk

5:58 PM Jun 08, 2015

0958 GMT [Dow Jones] A long limbo period is ending for those holding $950 million of bonds issued by Indonesia's Berau Coal Energy (BRAU.JK), 85% owned by cash-strapped Asia Resource Minerals (ARMS.LN). Indonesia's billionaire Widjaja family on Monday upped its cash offer for ARMs by 37%, and agreed to buy out a 17.21% stake held by British financier Nat Rothschild. The offer is credit-positive, says Trung Nguyen of Lucror Analytics--despite the fact the Widjajas were behind Asia's largest corporate default, the $14 billion implosion of Asia Pulp & Paper debt in 2001. The funds committed by the Widjajas to ARMs makes it "less likely they would walk away from their investments," Nguyen says, adding: "Whether they will squeeze bondholders to get back some of that cost increment remains to be seen." The yield on 2017 Berau debt, at 40.2%, barely budged on the news of the Widjaja takeover. (Dominique.fong@wsj.com; Twitter: @dominiquefong)

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