The title of this post is perhaps misleading, then again for those in the know perhaps not so misleading. I do not claim to be in the know but I do not mind engaging in a bit of wild speculation. Bad of me I know.The mainstream media is now reporting that The Minister of State Owned Enterprises, Sofyan Djalil (pictured), is supporting the idea of State Owned Enterprises buying into the Bakrie Group, specifically PT Bumi Resources and PT Bayan Resources. The shares are certainly not at rock bottom prices. The reality is that a number of Bakrie companies are in trouble either with debts due or debts falling due between now and April 2009.
The fact a Bakrie company defaulted on a loan led to some wild speculation that saw other Bakrie companies hit in a rapid sell-off of Bakrie stock. It is reported that the Bakrie Group accounts for somewhere between 8% - 10% of the Indonesian Stock Exchange. So, any dramatic fall in the Bakrie Group fortunes is going to have a significant impact on the market. And, so it did last week when Bakrie companies lost some 41% of their value in a matter of days.
According to Djalil, both Bumi Resources and Bayan Resources have pretty solid future prospects. Maybe this is true, however if the State Owned Enterprises are going to snap-up Bakrie shares then they are also going to be taking on some debt.
Interestingly, the word is that the Bakrie Group has approached the Stock Exchange with the idea of suspending further trade in its shares until they get on top of this mess and make some decisions. Indonesian law would allow the Stock Exchange the discretionary power to permit a suspension. Yet, if it did then there might be some serious questions on the fairness of the suspension when there are other Indonesian companies in equally perilous financial positions. My guess is that the Stock Exchange will entertain the approach but will make it known that they will not allow the suspension to happen. I would also guess that the Bakrie Group will then deny ever having contemplated such an idea. Simply, to grant such a request would be sure to be interpreted as providing a get out of jail free pass (well, at least at a much reduced cost).
The idea of selling the shares to SOEs is probably a more attractive option to the Bakrie Group than selling them off to a competitor. The belief being that if in the future the Group was to raise the capital elsewhere to pull them out of their credit hole then they would be able to re-acquire the shares back from the SOE. This might sound good in theory however it sounds a little more complex in reality. This is notwithstanding the "court of public opinion" that is likely to frown on any inkling of favourable treatment to the countries richest man (if he still is after last week's mauling is unclear).
I would expect that any transaction that sees a SOE buying into the companies of the family of the Coordinating Minister of People's Welfare should come in for some additional and special scrutiny to ensure that any accusations of favouritism can be quickly snuffed out.
