SINGAPORE (Reuters) - The directors of troubled Bumi Plc BUMIP.L, one of the world’s largest thermal coal exporters, gathered for a board meeting on Thursday amid an uncertain future for the company created by British-born financier Nat Rothschild and Indonesia’s Bakrie family.
Allegations of financial irregularities, against a background of weak coal prices and tumbling shares, have strained already frayed relations between major investors in the London venture and fuelled speculation of a potential split.
The meeting was being held in Singapore and Rothschild, 41-year-old scion of the Rothschild banking dynasty, was in the city, sources close to the company said. They said the board members had dinner together on Wednesday night.
The board includes Rothschild, Indra Bakrie, one of the Bakrie brothers, and Samin Tan, an Indonesian billionaire who pulled the Bakries back from default last year with a $1 billion investment, only to watch the value of his shares crumble.
The Bakries and Tan each hold half of a 47.6 percent stake in Bumi Plc, while Rothschild owns 12 percent.
The relationship between Rothschild and the Bakries, one of Indonesia’s most powerful and politically connected families, has soured over the past year, particularly after a leaked letter from the financier last November that called for a “radical clean-up”.
The letter was seen as a sign of his frustration with the Bakrie family, whose patriarch Aburizal Bakrie is an Indonesian presidential candidate.
Tan and the Bakries pushed out Rothschild as co-chairman in March and Tan became chairman.
But relations have also frayed between the Bakries and Tan. Sources have said Tan is “furious” with the Bakries after watching the value of his investment plunge — the shares he bought are worth only one-ninth the level at which he came in.
The board meeting is the first since an inquiry into potential wrongdoing at the group’s Indonesian operations was announced last month.
The independent probe, being led by a London law firm and still in progress, has revived worries over governance at Bumi Plc and concerns over the woes of its debt-burdened affiliate, PT Bumi Resources (BUMI.JK), the jewel in the Bakrie empire.
Heightening tensions before the Singapore meeting, the Bakries said on Wednesday that telephones and e-mail accounts belonging to the family and its group of companies had been hacked, pointing to unspecified “suspicions” over whom to blame. The incident has been reported to Indonesian police.
Most of the allegations of financial irregularity, expected to total more than $500 million, relate to Bumi Resources, the flagship Bakrie miner and Indonesia’s largest coal producer. Two of three investments at the center of the probe, though, have already been written down to zero by the London parent.
“While we are not able to quantify the amounts involved in these irregularities, we believe this investigation may reinforce the idea that the company needs to address its complex corporate structure,” analysts at JP Morgan, the bank that fostered the creation of Bumi, said in a note last month.
Bumi was listed in London last year via a reverse takeover engineered by Rothschild that aimed to create an international coal-mining powerhouse with operations in Indonesian Borneo, and one of the biggest listed companies on the London exchange.
The deal highlighted the promise of Indonesia, Southeast Asia’s biggest economy, which boasts some of the world’s largest deposits of coal, gold, copper, tin and natural gas, spread across an archipelago of 17,000 islands.
But banks and dealmakers looking for long-term investments in Indonesia must tread carefully around the powerful local conglomerate heads.
The Borneo coal mines at the heart of the deal once belonged to global energy companies Rio Tinto (RIO.L), BP (BP.L) and BHP Billiton (BHP.AX)(BLT.L), which sold them to the Bakries in 2001 and 2003, after facing pressure from nationalists to divest their assets to local interests.
Sources familiar with the matter said Thursday’s board meeting was a scheduled gathering, with a long-planned to-do list - but top of the agenda will be progress made by lawyers on their probe, which could run into next month.
The meeting of the board members, 16 after the resignation of former CEO Ari Hudaya, is expected to include Chairman Samin Tan, co-Chairman Indra Bakrie and Rothschild, and is therefore unlikely to escape discussion on the future of the group.
At least one of the sources, though, said no restructuring could be decided before the full investigation was completed.
Bumi Plc has long said it would like to bring together Bumi Resources, in which it owns 29 percent, and coal miner Berau, in which it owns 85 percent, into a single operating holding.
But options being considered by teams of advisers courting Bumi in recent weeks include more radical solutions, such as a divorce of Bumi Resources from the group.
Bumi Plc’s board could also seek to replace Hudaya, who was chief executive until March and is still chief executive of Bumi Resources.
Two sources also said they could not exclude other changes.
Additional reporting by Clara Ferreira-Marques in LONDON; Editing by Raju Gopalakrishnan