Bakrie 'down but not out' as credit crunch hits
Thursday, 4 December 2008
JAKARTA, Dec 3 (AFP): Billionaire Indonesian tycoon Aburizal Bakrie has pulled back from the brink of losing his political and business empire to the global credit crunch, but has come out badly battered, analysts say.
Formerly a powerful backer of President Susilo Bambang Yudhoyono, Bakrie has seen his political fortunes plunge along with share prices in Bakrie-linked companies as holding company Bakrie & Brothers struggled to rid itself of around 1.2 billion dollars in debt.
A deal last Friday to give an unspecified stake in coal giant Bumi Resources, the empire's key money spinner, to private equity firm Northstar Pacific Partners in return for the firm taking over 575 million dollars' worth of the debt appears to have saved Bakrie's skin.
Private equity fund Ancora Capital Management is reportedly taking over 72 million dollars in debt, offering the group further respite.
"The crucial question is has Bakrie become a corpse? The answer is no, he still has some value. He's down, but definitely not out," economist Pande Raja Silalahi said.
The Northstar deal-secured after weeks of delay and plunging Bumi stocks-shows Bakrie still holds some of his old clout, Silalahi said.
Northstar founder Patrick Walujo is reportedly a close family friend of Bakrie.
But the deal does not end the economic uncertainty for Bakrie's empire, with Bumi shares falling this week on continued market confusion about the deal's details.
Until recently, Bakrie was considered the richest man in Indonesia with a family fortune estimated at 5.4 billion dollars by Forbes Asia magazine last year.
Shares in companies across the Bakrie empire have since nosedived by as much as 90 per cent in recent months.
But even though it got them into the trouble in the first place, the Bakrie family's use of debt to expand their empire also means they are well positioned to bounce back, said economist Faisal Basri.
"They never use their own money, but borrow money to buy back shares. Their personal wealth is not touched," he said. A downside for Bakrie, who is also welfare minister in Yudhoyono's cabinet, is the political damage of a much slower-burning crisis: a massive mud volcano that has been flowing for more than two years in East Java, said political scientist Bima Arya Sugiarto.
The volcano, blamed on gas drilling by Bakrie-linked company Lapindo Brantas, has swamped a dozen villages, killed 13 people and displacing around 36,000 since it burst forth in 2006.
Delays over compensation for victims of the disaster and persistent attempts by Lapindo to avoid blame have trashed Bakrie's political image and turned him into a pariah, Sugiarto said.
"He's not a real politician, but a businessman. He is more involved in business than say, nation-building," Sugiarto said.
"He is a burden, not an asset. It's better for President Yudhoyono and Vice President Jusuf Kalla to maintain their distance. He's a controversial political figure and is not good for their image," he said.
Last week, Bakrie said he would not be seeking another term in the cabinet next year. And the public is just fine with that, Sugiarto said.
"His intention to leave is good news. In politics, it's all about trust. Once you lose it, your political capital gets smaller. And people don't trust his group anymore."
Formerly a powerful backer of President Susilo Bambang Yudhoyono, Bakrie has seen his political fortunes plunge along with share prices in Bakrie-linked companies as holding company Bakrie & Brothers struggled to rid itself of around 1.2 billion dollars in debt.
A deal last Friday to give an unspecified stake in coal giant Bumi Resources, the empire's key money spinner, to private equity firm Northstar Pacific Partners in return for the firm taking over 575 million dollars' worth of the debt appears to have saved Bakrie's skin.
Private equity fund Ancora Capital Management is reportedly taking over 72 million dollars in debt, offering the group further respite.
"The crucial question is has Bakrie become a corpse? The answer is no, he still has some value. He's down, but definitely not out," economist Pande Raja Silalahi said.
The Northstar deal-secured after weeks of delay and plunging Bumi stocks-shows Bakrie still holds some of his old clout, Silalahi said.
Northstar founder Patrick Walujo is reportedly a close family friend of Bakrie.
But the deal does not end the economic uncertainty for Bakrie's empire, with Bumi shares falling this week on continued market confusion about the deal's details.
Until recently, Bakrie was considered the richest man in Indonesia with a family fortune estimated at 5.4 billion dollars by Forbes Asia magazine last year.
Shares in companies across the Bakrie empire have since nosedived by as much as 90 per cent in recent months.
But even though it got them into the trouble in the first place, the Bakrie family's use of debt to expand their empire also means they are well positioned to bounce back, said economist Faisal Basri.
"They never use their own money, but borrow money to buy back shares. Their personal wealth is not touched," he said. A downside for Bakrie, who is also welfare minister in Yudhoyono's cabinet, is the political damage of a much slower-burning crisis: a massive mud volcano that has been flowing for more than two years in East Java, said political scientist Bima Arya Sugiarto.
The volcano, blamed on gas drilling by Bakrie-linked company Lapindo Brantas, has swamped a dozen villages, killed 13 people and displacing around 36,000 since it burst forth in 2006.
Delays over compensation for victims of the disaster and persistent attempts by Lapindo to avoid blame have trashed Bakrie's political image and turned him into a pariah, Sugiarto said.
"He's not a real politician, but a businessman. He is more involved in business than say, nation-building," Sugiarto said.
"He is a burden, not an asset. It's better for President Yudhoyono and Vice President Jusuf Kalla to maintain their distance. He's a controversial political figure and is not good for their image," he said.
Last week, Bakrie said he would not be seeking another term in the cabinet next year. And the public is just fine with that, Sugiarto said.
"His intention to leave is good news. In politics, it's all about trust. Once you lose it, your political capital gets smaller. And people don't trust his group anymore."