Rothschild stokes £1.5bn coal struggle
Mark Leftly is political correspondent at The Independent on Sunday and associate business editor across the Independent titles. He writes a weekly column, Parliamentary Business, published on a Wednesday, that covers politics and the City. He is a multi-award winning reporter and was named Press Gazette's business magazine journalist of the year prior to joining The Independent on Sunday.
Sunday 08 January 2012
Nat Rothschild has gained the upper hand in his power struggle with the Indonesian Bakrie family, after side-lining their top adviser at Bumi Resources, the £1.5bn-valued coal-mining concern that they co-own.
Credit Suisse, which is particularly close to the Bakries, has effectively been replaced as one of Bumi's brokers by Bank of America Merrill Lynch. Although Credit Suisse remains a broker for now, it is expected to exit Bumi within two to three months.
The scion of the Rothschild banking dynasty formed Bumi when the Bakrie family's Indonesian coal assets were reversed into his much-trumpeted cash shell, Vallar, last summer. Mr Rothschild is co-chairman with Indra Bakrie. However, by November, Mr Rothschild had fired off a letter to Bumi's chief executive Ari Hudaya, complaining about standards of corporate governance at PT Bumi. Confusingly, PT is the Bakries' existing company, which Mr Hudaya also heads up, and is one-quarter owned by the London-listed venture in the complicated tie-up that created the company.
Mr Rothschild accused PT of needing a "radical 'cleaning up'". The Bakries countered by describing his comments as "immature, hasty, irrational and poorly judged".
Mr Rothschild, who has an estimated fortune of £1bn, was angered by a debt crisis that struck the Bakries. Needing to refinance a $1.34bn loan, they agreed to sell half their Bumi stake to an Indonesian industrialist. Mr Rothschild, who had never met the man, Samin Tan, was relegated to fourth place on the Bumi shareholder register by the deal.
Mr Rothschild had been close to Credit Suisse, but the bank had led the $1.34bn loan. Under the terms of that debt, the Bakries defaulted when fears over the global slump and a fall in demand for coal pushed down shares by more than a third and, as a result, their collateral value dropped.
The loan, and the problems it caused, made Credit Suisse seem closer to the Bakries than to Mr Rothschild and it, inadvertently, became part of the row. JP Morgan, the company's other broker, has largely stayed out of the conflict and has retained its position.
A source close to the situation said: "This whole row has put Credit Suisse in an awkward spot: it's been close to the Bakries for a long time. This is a very logical move."
There has been speculation that a split could spread to Vallar's sister shell, the oil-focused Vallares, which has joined with the Turkish group, Genel, to exploit fields in Kurdistan. Credit Suisse advised on the tie-up.
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