Bumi Modern gets approval for rights issue

JAKARTA (JP): The Capital Market Supervisory Agency (Bapepam) finally gave approval on Friday to publicly listed tourism and hotel concern PT Bumi Modern's controversial rights issue plan.

"Bapepam has issued a letter giving allowing us to go ahead with the rights issue plan," the company's president, Jay Abdullah Alatas, said after the extraordinary shareholders' meeting on Friday evening.

Jay said the agency approved the plan after the management agreed to allow minority shareholders to decide whether the massive limited public offering should proceed.

The meeting to decide the fate of the rights issue plan, which was initially scheduled in the morning, was delayed until the agency gave its approval.

In the meeting, nearly 90 percent of the minority shareholders, who control about 50 percent of the company's shares, agreed to continue the plan, he said.

Bumi Modern plans to issue rights shares to raise about Rp 9.3 trillion (about US$1.28 billion) in fresh funds to acquire oil company Gallo Oil Ltd. of the United Kingdom.

Many analysts initially questioned the plan because the total assets of the company constituted only about 5 percent of the projected rights issue proceeds. More doubts were fueled by the fact the target company in the acquisition plan is owned by a company linked to businessman Aburizal Bakrie, the majority shareholder of Bumi Modern.

A transaction involving a potential conflict of interest is only legal if it is first approved by the minority shareholders. Bapepam initially rejected Bumi Modern's rights issue plan in late December, leading the company to reschedule its shareholders' meeting.

Bapepam, which suspected a possible mark-up, required Bumi Modern to hire an international auditor to appraise the two blocks of oil concession owned by Gallo Oil.

The agency head of corporate financial analysis Freddy R. Saragih refused to comment on the rights issue.

"No, I don't want to talk to the media today," he said.

A source at the finance ministry said Freddy risked being replaced for what was perceived as his overly exacting stance on the rights issue proposal.

Bumi Modern's total assets were Rp 443 billion as of last June, compared to Rp 423 billion as of December last year.

Gallo Oil has two blocks of concessions in Yemen with recoverable oil reserves of about one billion barrels, Jay said. 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.

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 the remainder 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 the year, compared to Rp 93 billion during the whole of 1998. (udi)