Indonesia Coal Miner Aims to Buy Back Bonds at 57% Discount

(Bloomberg) -- An Indonesian coal miner offered to buy back its outstanding dollar bonds at a discount of at least 57%, adding to signs of deepening stress for the sector as demand slumps amid the coronavirus pandemic.

Singapore-listed Geo Energy Resources Ltd. offered to pay $430 for every $1,000 of principal to noteholders who submit their tenders before June 4. There is about $154 million outstanding on the securities, which mature in 2022, the company said in an exchange filing Thursday. The price of the bonds has fallen steadily over the past few years into distressed territory.

Indonesia Coal Miner Aims to Buy Back Bonds at 57% Discount

“The escalation of the Covid-19 pandemic globally, coupled with the sharp declines in crude oil prices, in the recent months have affected the Asian coal sector,” said Charles Antonny Melati, Executive Chairman of Geo Energy. “The demand and price outlook for coal is more uncertain than ever.”

Across Asia, a growing swath of commodities firms are struggling, with Hong Kong-listed oil explorer MIE Holdings Corp. defaulting on a dollar note earlier this month. India’s Vedanta Resources Ltd. and oil refiner Shandong Qingyuan Group Co. are showing stress after a historic slump in oil prices.

“The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook and falling commodity prices have contributed to a decline in bond prices for rated Indonesian high yield companies, including coal miners,” Maisam Hasnain, a Singapore-based analyst at Moody’s Investors Service, said in an emailed response to Bloomberg queries.

S&P Global Ratings had lowered its long term issuer rating on Geo Energy to ‘selective default’ in March, as it regarded recent bond buybacks as a distressed exchange.

Reduced economic activity in China and the relative attractiveness of cheaper crude oil as an alternative source of energy have put further pressure on the Indonesian coal market, according to Geo.

The company is also seeking to terminate a provision with bondholders that mandated a repurchase of notes if the company’s coal reserves fell below an agreed amount.

©2020 Bloomberg L.P.

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