Sinar Mas Group, an Indonesia-based conglomerate, is working on a deal to list its Indonesian coal assets on the Singapore Exchange by swapping shares with a small forestry firm that is already listed on the stock market,reports Reuters. The reverse takeover would enable Sinar Mas Group to more easily raise capital for expansion.

The Singapore-listed company United Fiber System Ltd said on Friday it has signed a $1.2 billion agreement with PT Dian Swastatika Sentosa Tbk, an Indonesian coal mining company. Reuters explains:

Under the agreement, United Fiber will swap 92.8 percent of its enlarged share capital for a 67 percent stake in Golden Energy Mines Tbk, the holding company of several coal-mining firms in Indonesia. The 67 percent stake in Golden Energy is currently owned by Dian Swastatika.
Golden Energy is held by Widjaja family, which controls the Sinar Mar empire. Sinar Mas has interests in a range of businesses, including coal mining companies, Golden Agri Resources, a palm oil producer, and Asia Pulp & Paper (APP), a pulp and paper supplier. APP has struggled to raise money following its default on billions of dollars of debt in the early 2000s.

Indonesia’s coal mining sector is especially hot right now, with companies pouring billions into extraction of coal reserves in Borneo and Sumatra. The debt swap would ease capital-raising for Sinar Mas Group’s coal companies at a time when the sector is growing fast and has won an exemption from Indonesia’s moratorium on new forestry concessions.

“Most companies list in Singapore because it gives them access to the capital market, and if the market is keen enough on the sector, it’s quite easy for them to add on assets,” Carey Wong, commodities analyst at OCBC Investment Research in Singapore, told Reuters. “There are a lot of unlisted private coal mines in Indonesia that could be added on. Indonesia is sitting on a pretty rich vein of coal.”

Although it doesn’t rank among the world’s top ten in coal reserves, Indonesia was the fifth largest coal producer in 2009 following China, the U.S., Australia and India. It is the largest exporter of thermal coal.

SOURCE: Harry Suhartono.Sinar Mas eyes backdoor listing in Singapore with $1.2 bln dealReuters Jan 26, 2012.