JSX halts Bumi Modern trading amid rights issue questions

JAKARTA (JP): The management of the Jakarta Stock Exchange (JSX) suspended on Monday trading of property concern Bumi Modern amid controversy over its massive rights issue plan.

The exchange said in a statement it took the action because the company had not given a specific schedule for its limited share offering plan.

"The trading suspension was effective as of Feb. 21, in the first session of trading, at 9:30 a.m. until further explanation is given (by the company)," the exchange said.

The company's stock price managed to rise by Rp 25 to Rp 350 before the suspension.

Institutional sales broker at Trimegah Securindolestari, Vonny Juwono, supported JSX's move because the market knew virtually nothing about the rights issue plan following a hasty extraordinary shareholders meeting last Friday.

"We don't know yet what the next step Bumi Modern will take after it conducted the shareholders meeting on Friday," Vonny said.

The Capital Market Supervisory Agency (Bapepam) initially rejected Bumi Modern's rights issue plan in late December, leading the company to reschedule its shareholders' meeting to last Friday.

The agency gave last-minute approval to the company's plan on Friday, heightening suspicion among investors.

Bapepam chief Herwidyatmo defended on Monday the agency's decision, saying the company provided the required information to Bapepam at the last minute.

"Bapepam is not in a position to ban (the shareholders meeting). Bapepam is in the position to protect investors through disclosure of information," he said.

A few hours after it received the agency's approval, Bumi Modern held its extraordinary shareholders meeting.

Nearly 90 percent of the minority shareholders, who control about 48 percent of the company's shares, approved the company's rights issue plan.

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, which has two concession areas in Yemen.

Many analysts questioned the plan because the total assets of the company constituted only about 5 percent of the projected rights issue proceeds.

Skepticism was also fueled by the fact the target company in the acquisition plan is owned by a firm linked to businessman Aburizal Bakrie, the majority shareholder of Bumi Modern.

The head of research at Socgen-Crosby Indonesia, Lin Che Wei, said the planned acquisition of Gallo Oil by Bumi Modern served only as a ploy by the Bakrie Group to transfer Gallo Oil assets into liquid securities assets through "manipulated pricing" on the JSX.

He said if Bumi Modern proceeded in its rights issue plan, the Bakrie Group would be able to pay its huge debt to the Indonesian Bank Restructuring Agency (IBRA) using its Bumi Modern assets, whose book value would inflate following the acquisition.

"It will only become a scandal when IBRA agrees to accept the portfolio assets instead of cash from Bakrie. I guess IBRA will face difficulty in selling the assets to investors," he said.

"So, it's only a tactic by Bakrie to settle its debt to IBRA."

The Bakrie Group's communications manager, Lalu Mara Satria Wangsa, said Bumi Modern followed all the regulations and therefore the market should not be suspicious about its planned rights issue.

He questioned why the company was a "target" of suspicion because transactions involving enterprises under the same group were common practice in Indonesia.

He said proceeds from the rights issue would be used to finance the acquisition of Gallo Oil, and not to repay the Bakrie Group's debt to IBRA.

"But if later Bakrie Capital wants to sell its ownership in Bumi Modern, it's its right as the shareholder," he said.

Bumi Modern, which is 52 percent owned by Bakrie Capital and the remainder by the public, held 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. (03/rid)