VZCZCXRO9887
PP RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #2096/01 3181135
ZNR UUUUU ZZH
P 131135Z NOV 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 0640
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHMFISS/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 JAKARTA 002096 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EAP/MTS, EAP/EP, EEB/IFD/OMA, EEB/IFD/OIA, 
EEB/ESC/IEC/ENR, EEB/CBA 
DEPARTMENT PASS SECURITIES AND EXCHANGE COMMISSION 
TREASURY FOR T. RAND 
COMMERCE FOR 4430 BERLINGUETTE/KELLY 
SINGAPORE FOR S. BAKER 
ENERGY FOR PI-32 CUTLER/GILLESPIE 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ENRG EMIN EINV ID
SUBJECT: THE BAKRIE GROUP: BUMI SHARE PRICE PLUNGES AS 
TRADING RESUMES 
 
REF: JAKARTA 1987 
 
¶1. (SBU) Summary: On November 6, trading resumed in shares of 
Bakrie Group-owned PT Bumi Resources ("Bumi"), suspended 
since October 7.  The share price immediately fell nearly 10% 
until automatic trading limits kicked in and trading was 
suspended for the day.  Bumi shares met the same fate on the 
next five trading days, with the share price falling from IDR 
2175 to IDR 1180.  Press reports have detailed internal 
government of Indonesia wrangling over the decision to resume 
trading, including the reported threatened resignation of 
Finance Minister Sri Mulyani Indrawati, who favored 
resumption.  Trading resumption indicates that those in the 
government who may have tried to protect Bakrie interests 
were unable to continue shielding those interests in the face 
of growing pressures from regulators and the investing public 
for whom the continued suspension was growing increasingly 
difficult.  Analysts viewed trading resumption as a win for 
financial regulators against interested politicians.  It is 
not clear whether resumption of trading in Bumi shares will 
affect a reported $1.3 billion offer to purchase Bakrie & 
Brothers' 35% stake in Bumi, made by Northstar Pacific 
Partners, an Indonesian private equity firm affiliated with 
U.S.-based private investment firm Texas Pacific Group (TPG). 
 Despite continued doubts regarding the Bakrie Group's 
financial difficulties and Bumi's ultimate disposition, its 
large thermal coal resources remain an attractive investment 
target if tangled Bakrie Group ownership issues can be 
overcome. End summary. 
 
GOI WRANGLING INTENSE 
- - - - - - - - - - - 
 
¶2. (U) Rumors about government wrangling were fed by the 
Indonesia Stock Exchange's (IDX) announcement of its 
intention to resume trading in Bumi on November 5, only to 
delay resumption upon government request.  Press reporting on 
the delayed resumption of trading in Bumi shares alleged that 
IDX management had been overruled by a government official 
"more senior" than Coordinating Minister for the 
Economy/Finance Minister Sri Mulyani Indrawati.  Reports 
continued that the decision to lift the suspension on 
November 6 followed a meeting between President Yudhoyono and 
Sri Mulyani, when she reportedly threatened to resign.  A 
presidential spokesman denied that rumor, advising that the 
president did not involve himself in such issues.  Sri 
Mulyani reportedly had been urging resumption of trading in 
shares of several Bakrie Group conglomerate companies, which 
had been suspended since October 7.  A November 10 Jakarta 
Post article characterized the fight over trading resumption 
in Bumi shares as an "epic battle of capital market integrity 
and independence" versus the "financially sophisticated, 
politically connected," and concluded that IDX, Bapepam (the 
Capital Markets Supervisory Agency) and the Finance Ministry 
"had shown real courage and grace under fire in their finest 
hour as regulators." 
 
RESUMED BUMI TRADING:  LIMITED IMPACT ON BROADER MARKET 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶3. (U) On the first day of resumed trading, Bumi's decline 
weighed on markets, with the Jakarta Composite Index (JCI) 
falling by 4.27% on November 6, a day most bourses fell in 
the region.  Some 1.9 billion shares of Bumi, equal to more 
than 10% of total shares, were reported offered for sale, 
indicating the pent-up demand to sell.  While Bumi registered 
similar declines in share price through November 13, the 
broader market either closed higher, or registered only small 
declines (down 0.31% on November 11 and down 0.74% on 
November 12). (Note: The JCI's 5% decline on November 13 
coincided with sharp losses in the region and Bank Indonesia 
imposition of new foreign currency regulations (septel).) 
 
 
BAKRIE GROUP PRESSURED TO DISCLOSE DETAILS OF REPORTED OFFER 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
 
JAKARTA 00002096  002 OF 003 
 
 
¶4. (U) Bapepam Chairman Fuad Rahmany announced November 4 an 
intention to sanction Bakrie & Bros. if the firm did not make 
a full public disclosure regarding terms of the reported 
purchase offer and its plans to resolve repo agreements with 
brokers (see reftel) during the week of November 3. 
Meanwhile, Bakrie & Bros. had requested that trading in 
shares remain suspended for an additional 21 to 28 days until 
Bumi's puchase could be completed.  (Note:  Northstar Pacific 
Partners manager Patrick Walujo told press on November 10 
that the conditional sales agreement, signed October 31, was 
exclusive and gave Northstar Pacific Partners 28 days to 
carry out due diligence.  End note.) 
 
SUSPENSION IN TRADING WEIGHED ON 
INVESTING PUBLIC, SOME BROKERS 
- - - - - - - - - - - - - - - - 
 
¶5. (U) Local press had reported that the extended halt in 
trading of Bakrie Group-owned companies had become 
increasingly burdensome to other Bumi shareholders who wanted 
to sell.  Many shareholders also reportedly faced margin 
calls, as the Bumi share prices had dropped sharply (32% on 
October 6) before trading was suspended.  Many of those 
shareholders and their brokers wanted trading to resume.  In 
consultations with the IDX board and Bapepam, the Association 
of Mutual Fund Managers, representing funds valued at IDR 90 
trillion with a large numbers of investors, reportedly 
favored continued trading of Bumi shares.  The brokerage 
community was split, with 48 supporting suspension of 
trading, 7 supporting continued trading and 22 abstaining, 
according to the daily Kompas (November 11). 
 
¶6. (U) A number of investor community representatives and 
brokers had become increasingly vocal about the harm being 
done to the reputation of the IDX in the eyes of both 
domestic and foreign investors as the suspension in trading 
continued.  Perceived reputational damage increased following 
the November 5 government intervention to delay a resumption 
in trading. 
 
WHILE OTHERS FAVORED CONTINUED SUSPENSION 
- - - - - - - - - - - - - - - - - - - - - 
 
¶7. (U) However, other firms and individals which had entered 
into repurchase agreements with Bakrie & Bros., in which they 
had bought Bumi shares with the agreement of Bakrie & Bros. 
to repurchase the shares, feared a resumption in trading 
would jeopardize Bumi's possible sale and harm their chances 
of being repaid.  While the press reported some brokers to be 
in danger of falling below minimum mandatory capital 
requirements as a result of their Bumi-repo exposure, Bapepam 
Chair Rahmany publicly stated that only five brokerage firms 
had significant exposure to Bumi repos and the exposure was 
not as large as previously reported. 
 
 
LIST OF POSSIBLE PURCHASERS GROWS 
- - - - - - - - - -  - - - - - - - 
 
¶8. (U) During the last month, there have been numerous 
reports about rumored buyers for Bumi.  On November 1, a 
Bakrie & Bros. spokesman announced that Bakrie & Bros. had 
accepted a purchase offer from Northstar Pacific.  Northstar 
Pacific Partners and TPG are partners in a joint venture 
private equity fund ("Northstar Equity Partners") with more 
than $300 million in assets reported under management.  The 
firm is run by Patrick Walujo, described as a former Goldman 
Sachs investment banker.  Press reports cited one investment 
banker as characterizing this deal as "an agreement to agree, 
with negotiations at a preliminary stage," and some observers 
construed the announcement as signaling an invitation for 
other parties to launch competing bids.  On November 2, 
state-owned mining company PT Tambang Batubara Bukit Asam 
also said it had joined a consortium to purchase Bumi. 
 
¶9. (U) Meanwhile, Philippines'-based San Miguel Corp., was 
reported to have confirmed its interest in preparing a 
 
JAKARTA 00002096  003 OF 003 
 
 
separate bid to acquire 51% of Bumi. Other rumored potential 
buyers include U.S. hedge fund Farallon Capital, India's Tata 
Group, and Indonesian investment bank PT Renaissance Capital. 
Previously rumored potential buyers, including state-owned PT 
Aneka Tambang, said they were not a part of the Northstar 
consortium, according to press reports. 
 
¶10. (SBU) Despite the current lack of clarity regarding the 
ultimate disposition of Bumi and of the Bakrie Group's 
efforts to overcome its financial difficulties, the apparent 
interest of U.S.-linked private equity is a notable 
development.  While many foreign investors have chosen to 
exit the Indonesian market at a time of increased risk 
aversion, Bumi's large thermal coal resources are an 
attractive investment target, if tangled Bakrie Group 
ownership issues can be unwound sufficiently to enable the 
Group to deliver its 35% stake in Bumi free and clear to one 
or more interested buyers. 
 
HUME