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sia’s largest power-station coal exporter PT Bumi Resources, the bread and butter of the politically wired Bakrie family, is in trouble again as investors continue to dump its shares amid a doomsday prophecy of possible bankruptcy.

Bumi shares spiraled down to their lowest level in more than three years on Wednesday, closing 11.8 percent lower at Rp 670 following concerns over a whopping first-half loss, and an affiliated investment company that has failed to repay Bumi’s US$231 million loan.

Amid the negative news, research by PT Panin Sekuritas on Wednesday indicated that Bumi might head into insolvency.

“It can be concluded that Bumi is in the unsafe zone, or headed towards financial bankruptcy,” said research by Fajar Indra, equity analyst for the metals and mining sector.

The conclusion is based on the so-called Altman Z Score — a financial tool to predict the probability of bankruptcy within two years.

Based on the calculation, Bumi achieved a score of 0.98 points, which is below the safe benchmark of 1.1 points.

“Our calculation was based on Bumi’s first-half financial report,” the research pointed out.

Bumi recently announced a loss of $334.1 million in the first half due mostly to derivatives transactions and foreign exchange discrepancies.

“Bumi’s financial report even notes that the financial load it has to bear is higher than the business’ profit. This shows just how bad Bumi’s solvency is in paying its debts,” the research noted.

The report also pointed to Bumi’s failure to withdraw its funds of $231 million from PT Recapital Asset Management by the deadline.

Bumi and Recapital are in talks for a new repayment schedule. Bumi board member Rosan Roeslani is the president director of Recapital and the loan was at the center of a dispute between noted banker Nathaniel Rothschild and Indra Bakrie, who founded Bumi Plc together to parent Bumi Resources.

Late last year Rothschild called for a radical cleaning up at Bumi, including the repatriation of funds deposited with connected parties.

According to Panin, if Bumi Resources were to cash in their loans to Recapital, the funds could actually be used to refinance their debts.

Bumi has debts to the China Investment Corporation (CIC) worth $600 million and $700 million. Based on the first half financial report, the firm has non-current liabilities of $4.72 billion.

Bumi director Dileep Srivastava refused to “comment on rumors and speculation” when asked to
respond to Panin’s research.

“How could Bumi be said to be bankrupt when our operational results are strengthening every quarter?” he said.

He noted that Bumi’s revenues had increased almost 9 percent to $1.9 billion in the first half compared to the previous semester.

“And with approximately 3 billion tons of coal reserves and non-coal liquid assets, it is difficult to visualize the armchair scenario. Asset sales will help reduce our debts, of course, only at the right price,” he said.

Noted analyst Lin Che Wei of Independent Research and Advisory said Bumi was facing a “potential default” instead of bankruptcy.

He further added that Bumi was often “thrown a life-line” whenever it entered the unsafe zone, and a turnaround in commodity prices could steer Bumi back to safety.

Commodity prices have been on the decline, with the price of coal slipping 22.5 percent to $84.65 in August from $109.29 in January.

“Commodities rarely continue at low prices, given that the price fluctuates regularly,” Lin added.

History has shown that troubles plaguing Bumi have eventually been resolved. The Bakries, headed by Golkar Party chairman Aburizal, know better than most what a crisis feels like and how to settle it.

After being squeezed in late 2008 with a debt fiasco that threatened the sustainability of their bu-
siness empire, the family emerged from a round of trouble only slightly scathed by selling some of its assets, including in Bumi, to affiliated investors, but without losing control of the family’s crown jewel.