Geo Energy fails to get noteholders' nod to loosen notes terms

INDONESIAN coal miner Geo Energy Resources said on Friday that no amendments will be made to the indenture governing the 8 per cent senior notes issued by its wholly-owned unit Geo Coal International, since it failed to get the consent of noteholders to do so.

The amendments would have given the group more financial flexibility at the expense of its noteholders.

As part of the consent-solicitation exercise announced on May 21, Geo Coal offered to buy back the outstanding US$154 million notes at a tender price that was less than half of par value. 

As at the early tender deadline on Thursday this week, an aggregate principal amount of US$20.9 million of the notes had been validly tendered.

Those who tendered before June 4 will receive US$430 per US$1,000 principal amount of the notes, plus accrued and unpaid interest up to but not including the settlement date.

Those who tender after June 4 but by June 18 will receive a lower sum of US$400 per US$1,000 principal amount plus accrued and unpaid interest.

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The notes were issued with a final maturity date in 2022.

Geo Energy chief executive Tung Kum Hon said the tender offer is meant to give the group flexibility to take on more debt for working capital and other corporate purposes.

"It is prudent for us to have more flexibility right now and make acquisitions when they make the most sense rather than have to make rushed investments to meet the minimum-coal-reserve condition," he said.

"The tender offer is driven by reverse enquiry from investors that no longer had the mandate to hold our notes due to size or rating, or simply wanted to exit for liquidity on margin calls."

On the failed consent-solicitation exercise, Mr Tung said that the 75-per-cent requisite-consent threshold was not easy to achieve given the Covid-19 pandemic, which has imposed restrictions on people's movements and efforts to reach out to all noteholders.

He added: "The group will record a gain of US$11.5 million upon settlement for the tendered notes and, depending on any further notes tendered up to the expiration date, the gain could be greater. Together with the gain of US$19.2 million when we last purchased our notes on April 28, 2020, the total gain since March 31, 2020 would be US$30.7 million."

As at April 30, the group's cash and bank balances was US$81.6 million. After taking into consideration the cash of US$9.3 million for the settlement of the US$20.9 million notes tendered at the early-tender deadline, the cash balance will be reduced to US$72.3 million.

The group said it will review its cash management and seek other sources of funding and joint ventures to expand its business.

Geo Energy is currently carrying out exploration activities on the southern part of the PT Tanah Bumbu Resources (TBR) coal-mining concession to locate additional proved and probable coal reserves.

On May 19, the group's consultant had indicated that the total proved and probable reserves of the PT Sungai Danau Jaya (SDJ) and TBR coal mining concessions combined may increase by approximately 29 million tonnes.

This indication is preliminary and does not represent JORC-compliant information. Work to complete the reserves and resources report is ongoing, the group said. (JORC stands for Joint Ore Reserves Committee.)

Geo Energy has applied to the relevant Indonesian government authorities for the extension of its SDJ coal mining concession, which expires in May 2022, and its TBR coal mining concession, which expires in January 2022.

If approved, the Group expects the SDJ and TBR coal mining concessions to be extended for five and six years respectively.

Upon completion of these processes, a so-called "mandatory-offer-to-purchase" covenant in the notes indenture may fall away, the group warned.

This covenant is a put option that requires Geo Coal or Geo Energy to make an offer to buy back all outstanding notes if it fails to satisfy certain minimum coal reserve requirements by April 4, 2021.

Geo Energy shares fell 0.4 Singapore cent or 3.08 per cent to S$0.126 on Friday.

Geo Energy will host its annual general meeting on June 15.