Bumi Resources Questions Motives of London Probe: Southeast Asia

Bumi Plc. Co-Founder Nathaniel Rothschild
Nathaniel Rothschild, co-founder of Bumi Plc. Photographer: Andrew Parsons/Parsons Media/Finsbury via Bloomberg

PT Bumi Resources said a probe by Bumi Plc, the London-listed shareholder founded by Nathaniel Rothschild, and subsequent “leaks” about the matter are an attempt to damage the Indonesian coal producer.

“The present situation is unfortunate and is an internal issue between a few shareholders who have chosen to go external, managing media through innuendo,” Bumi Resources Director Dileep Srivastava said in an e-mailed statement. “This appears to be an attempt to damage the inherent value of our business by orchestrating internal issues and leaking them publicly, for motives which appear dubious.”

Bumi Plc, owner of 29 percent of the Jakarta-based miner, said Sept. 24 it began investigating “potential financial and other irregularities” and hired lawyers to look into a $637 million writedown of development funds and exploration assets. Moody’s Investors Service changed its outlook on Bumi Resources to negative from stable on Sept. 25, while Standard & Poor’s cut its long-term rating by a step to BB- the next day.

“The Bumi issue has made foreign investors question whether corporate governance has become an area of concern once again,” said Soni Wibowo, vice president at Jakarta-based Bahana TCW Investment Management, which owns Bumi Resources shares. “We don’t think it is an issue. Indonesia’s corporate governance has improved a lot, especially among the big caps.”

Bumi Resources was unchanged at 730 rupiah as of 11:23 a.m. in Jakarta. The stock has plunged 66 percent this year, compared with an 11 percent gain in the benchmark index. Bumi Plc fell 5.7 percent to 147.1 pence at the close in London yesterday.

Rothschild, Bakrie

The probe is the latest turn in a dispute involving Rothschild and Indonesia’s Bakrie family since they agreed to a $3 billion deal in 2010. Relations between Rothschild and Bumi Co-Chairman Indra Bakrie soured last year after the U.K.-based financier made public a letter to then-Chief Executive Officer Ari Hudaya urging a “radical cleaning up” of Bumi Resources.

Bumi Resources said Sept. 26 it hadn’t received any advance notice about the probe. A spokesman for Bumi Plc in London declined to comment.

Recent events may hamper Bumi Resources as it seeks to refinance debt in the next year, S&P and Moody’s said. The company has $3.95 billion of debt, with $300 million due in the next year, Moody’s said. S&P put the figure at $400 million. “There is no significant debt that is due before end-2013, so we are not sure where the true concern lies,” Srivastava said.

Probe Focus

The investigation will focus on “extensive” development funds at Bumi Resources and an asset in PT Berau Coal Energy, another coal holding, which were marked down to zero in the accounts of Bumi Plc as of Dec. 31, Bumi Plc said. It gave no figures for the writedown at that time.

The Indonesia stock exchange sent letters to Bumi Resources and Berau yesterday asking them to provide details of the matter to shareholders by Oct. 2, said Uriep Budhi Prasetyo, a compliance director at the exchange. The Indonesian capital-markets regulator said Sept. 26 it would wait for the results of Bumi Plc’s probe before taking any action.

According to a 2011 annual report published in April, Bumi Plc wrote down exploration-asset values by $390 million to zero and cut the value of business development funds by $247 million.

“Whatever actions we take are in the public domain, approved by shareholders, and shareholders have given discharge to the company for its accounts to date,” Srivastava said yesterday in the statement.

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