JAKARTA: Bakrie Group's and PT Bukit Mutiara's shareholding in Bumi Plc -- formerly known as Vallar Plc -- will be diluted to 39.7% and 9.6%, respectively, after US$2.07 billion of bonds are converted into Bumi Plc's new shares.Currently, Bakrie Group -- PT Bakrie & Brothers Tbk (BNBR) and Long Haul -- control 54.6% shares of Bumi Plc, while Bukit Mutiara owns 13.3% shares.By converting Bumi Plc convertible bonds into equity shares, the share portions of existing shareholders would be diluted by 27.3%, according to PT Mandiri Sekuritas.Bumi Plc will issue convertible bond amounting to US$2.07 billion to PT Bumi Resources Tbk (BUMI). In return, Bumi will give 75% of PT Bumi Resources Minerals Tbk (BRMS) to Bumi Plc.We think the transaction is part of a series of transactions that will involve a US$1.9 billion debt owed by Bumi to China Investment Corporation. We see that the bond issuance'' is only a bridging facility, Mandiri Sekuritas said.Bakrie & Brothers declined to comment on the potential dilution of shareholding in Bumi Plc due to the debt conversion.The convertible bonds will be used to repay the high interest debts like those extended by CIC PT Bumi Resources Tbk Director Dileep Srivastava.Converted bonds can easily be cashed to lower leverage, to repay expensive debts like those from CIC, in efforts to maximize profits for the shareholders and stakeholders, Dileep said in an email.Two years ago, Bakrie Group, through its main coal miner,Bumi, pocketed a loan facility from the Chinese-owned company amounting to US$1.9 billion plus 19% return rate or lower than bond conversion value of Bumi Plc by US$1.07 billion.In a research published by Bank of America-Merrill Lynch yesterday, Bumi didnt directly get proceed from the bond conversion, unless the bond is sold directly.Profits may fallThere is a plan to list the bond, but we doubt the plan will realize considering the massive diluted portion that will happen to Bakrie and Rothschild, the research report says.In yesterdays trading, the share price was corrected by 2.92% to IDR3,325 per share, while shares of Bumi Plc were stagnant at 12 pound sterling and shares of Bumi Minerals closed unchanged at IDR750. (t01/msw)

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