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Bakries afloat with debts under control
Members of the nation’s richest family, the politically wired Bakries, headed by chief welfare minister Aburizal Bakrie, probably know better than most just what a crisis feels like and how to settle it in an ingenious way
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Members of the nation’s richest family, the politically wired Bakries, headed by chief welfare minister Aburizal Bakrie, probably know better than most just what a crisis feels like and how to settle it in an ingenious way.
They survived the late-1997 Asian financial crisis thanks to liquidity support from the central bank, and managed to avoid being officially declared responsible for the 2006 mudflow disaster that has displaced more than 3,000 people in Sidoarjo, East Java.
After being squeezed since early October with a debt fiasco that threatened the sustainability of the Bakries’ business empire, the family may emerge from this round of trouble only slightly scathed.
The news on Friday from the family’s investment flagship PT Bakrie & Brothers that it had resolved most of its debt problems without having to lose control of its “bread and butter” firm PT Bumi Resources was a sign the empire would stay afloat.
Bumi, the world’s largest thermal coal exporter, contributes around 88 percent of Bakrie & Brothers’ consolidated profit.
“More or less, now the Bakries Group of companies can finally have a chance to breathe,” Mandiri securities analyst Ari Pitoyo said at the weekend.
But he was quick to add that many questions remained unanswered, primarily concerning the number of shares Bakrie would hold in Bumi and the way the firm settled its debts.
“We don’t know how much of the debts have been paid by the company, or how they resolved it,” Ari said. “It is important for the market to know, because we need certainty.”
Bakrie & Brothers president director Nalinkant A. Rathod said the company had managed to settle most of its debts in part via a deal with Northstar Pacific Partners Ltd., a local arm of U.S. buyout firm Texas Pacific Group (TPG).
“Bakrie’s debt problems have all been settled (with the deal),” said Nalinkant, stressing that Bakrie would not lose control of Bumi as it would manage the company jointly with Northstar.
Northstar, founded by businessman Patrick Walujo — a member of President Susilo Bambang Yudhoyono’s campaign team both in 2004 and for the 2009 election — will buy out Bakrie’s US$575 million debt from Oddickson Finance SA.
Northstar will own the Bakrie shares pledged to the creditor, including those in Bumi.
“I think the Bakries will survive no matter what the situation, even if they lost Bumi. This is based on their history, which shows they have managed to survive numerous crises,” BNI securities analyst Norico Gaman said.
Nalinkant said the information on the breakdown of Bumi shares to be owned by Northstar and Bakrie would be available by the end of the year.
Having been bogged down in debts of more than $1.2 billion pledged with collateral, which should have been settled immediately, Bakrie & Brothers somehow managed to shrink the debt.
“All other debts have been settled except for the $200 million that will be resolved by this year,” Nalinkant said, adding that Bakrie had paid most of the debts with stakes in some affiliated firms.
The Bakrie & Brothers debt fiasco is said to have sparked disagreement between Yudhoyono and Finance Minister Sri Mulyani Indrawati, who opposes the President’s reported tendency to favor the Bakries — key financiers of his 2004 campaign.
Key points in debt settlement:
1. Debts to Oddickson, originally totaling US$1.08 billion, were reduced to $575 million, of which about $200 million has been paid with assets and another $200 million has been cut on exchange gains.
2. Debts to JPMorgan totaling $72 million were settled last week, while $105 million in debts to India’s ICICI Bank will be settled by the end of this year.
3. Other debts not covered under the latest scheme will be settled by the end of this year, including some $200 million remaining.
4. Northstar will set up a joint venture company with Bakrie & Brothers. This company will in turn own the Bakries’ collateralized assets presently in custody of Oddickson.
5. Some of the Bakrie debt settlement took the form of a debt buyback, which will remain as a liability in the company’s balance sheet and will be settled within 12 months.
Additional reporting by Mustaqim Adamrah.
