Bumi Modern fails to get approval for rights issue

JAKARTA (JP): Publicly listed tourism and hotel concern PT Bumi Modern failed to secure approval from the Capital Market Supervisory Board (Bapepam) for its planned rights issue to raise Rp 9.3 trillion (about US$1.28 billion) to acquire oil company Gallo Oil Ltd. of the United Kingdom.

Company president Jay Abdullah Alatas said on Tuesday Bumi Modern had not met all of Bapepam's requirements for the rights issue.

"We will soon comply with all the regulations as set out by Bapepam and other related institutions so we can complete the rights issue soon," he said.

According to Bapepam, Bumi Modern has yet to submit the results of the asset and financial audits of Gallo Oil, which must be performed by an independent foreign auditor.

There is also a conflict of interest in the planned purchase of Gallo Oil, because Bakrie Capital Indonesia (BCI) -- the majority shareholder of Bumi Modern -- has indirect ownership in Gallo Oil, according to Bapepam.

BCI, through an affiliate, owns 25 percent of Gallo Oil.

Gallo Oil has two blocks of concessions in Yemen with recoverable oil reserve of about one billion barrels, according to Jay. The two blocks are the 2,856-square-kilometer Block R-2 in East Al-Maber and the 7,417-square-kilometer Block 13 in Al- Armah.

Gallo Oil currently is 75 percent owned by Long Haul Holdings Ltd. and 25 percent owned by Minarak Labuan Ltd., which is related to the Bakrie Group.

Economic observer Umar Joworo said Bumi Modern had not given the public enough information on the planned rights issue to allow them to make an investment decision.

"They haven't presented adequate evidence that they can meet their promise to start producing oil in late 2001. We do not want investors to only buy hope from them," he said.

Bumi Modern expects to begin oil production in late 2001 when it finishes the exploration phase, Jay said.

Umar also doubted the capability of the management of Bumi Modern, most of whom have zero experience in the oil business.

"Most of them are property people. How will they manage to transform themselves into oil company executives," he asked.

Jay countered that Bumi Modern was ready to recruit people with expertise in the oil industry when the company completed its planned purchase of Gallo Oil.

Bumi Modern had planned to hold a one-for-24 rights issue to raise Rp 9.3 trillion, far higher than its total assets of Rp 443 billion.

About 98.5 percent of the proceeds of the rights issue would be used to finance the acquisition of Gallo Oil, and the remaining 1.5 percent, or about Rp 150 billion, would go toward strengthening Bumi Modern's working capital.

The right shares, which would have a nominal value of Rp 500 each, would be sold at face value.

Bumi Modern, which is 52 percent owned by Bakrie Capital and 48 percent owned by the public, had total assets of Rp 443 billion as of last June, compared to Rp 423 billion as of December last year.

Its total revenue was Rp 18.5 billion during the first six months of this year, compared to Rp 93 billion during the whole of 1998.

The company booked a net loss of Rp 5 million during the first six months of the year, compared to a net loss of Rp 29 million in 1998. (udi)