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European Contagion Could Infect Bumi: Morgan Stanley
May 11, 2010

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Bondholders of coal giant PT Bumi Resources are at risk should the contagion from Europe’s debt crisis spread to Asia, according to investment bank Morgan Stanley.

Bumi was identified by the investment bank as having low “funding flexibility,” Viktor Hjort, Morgan Stanley’s Hong Kong-based credit strategist, wrote in a note to clients. “In a contagion environment credit-default risk narrows down to a single factor — access to funding,” he said.

Bumi Resources, which has $638 million of debt due by the end of 2012, had its share-price estimate cut to Rp 2,300 from Rp 2,400 by Goldman Sachs last month after profit declined. Bumi aims to “reduce leveraging by more than $1 billion” this year, said Dileep Srivastava, the Bakrie Group coal miner’s head of investor relations. 

Bloomberg