Indonesia regulators no stiff test for Bumi Resources

Tue Sep 25, 2012 8:01am EDT
 
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By Neil Chatterjee and Janeman Latul

JAKARTA (Reuters) - The Indonesian coal miner accused of irregularities by Bumi Plc, the London-listed coal venture co-founded by financier Nathaniel Rothschild, is unlikely to face intense regulatory scrutiny at home, industry sources said on Tuesday.

While Indonesia's Capital Market and Financial Institution Supervisory Agency - known as Bapepam-LK - is responsible for supervising any probe into the finances at PT Bumi Resources, it lacks the teeth needed to force Asia's biggest thermal coal exporter into action.

"There tends to be weak enforcement of capital markets rules in Indonesia, so the direct regulatory impact will probably be limited," said Kevin O'Rourke, an independent risk consultant in Jakarta. Sarjito, head of Bapepam's investigation bureau, said he had not yet received anything on the matter from Bumi.

That suggests a slow start to the probe launched by Bumi Plc into potential irregularities in more than $500 million of funds at its Indonesian subsidiaries, which could reinforce growing uncertainty over its stock after a 25 percent tumble on Monday.

If the probe extends to loans to related parties as well as development funds, the sum in question could total $1.1 billion, said a source familiar with the investigation.

Bumi Plc shares recovered nearly 6 percent on Tuesday, having lost over half their value in the past five sessions. The stock is down 82 percent this year, compared to an 18 percent rise in the UK mid-cap stock index.

In Jakarta, Bumi Resources fell as much as 13 percent on Tuesday on a perception the crisis could drag on, before closing up 1.5 percent.

Analysts at UBS still expect more selling pressure. "We worry about Bumi's ability to meet interest cost obligations over the next 12-18 months," they said in a client note. Nomura analyst Patrick Jones downgraded the stock to 'reduce', noting challenges in servicing Bumi Resources' $4.1 billion gross debt.   Continued...