Market Report: Bumi battered by fears over shareholders' debts

  • @greentoby

With yesterday a horror show for stocks across the Square Mile, Bumi was one of the worst hit amid renewed fears over the debts of the Bakrie family. The Indonesia miner, which was co-founded by financier Nat Rothschild, slumped 46.1p to 497.4p following reports claiming the family needs to resolve a covenant breach on a loan worth $437m (£271.1m) by the end of the week.

With Bakrie's stake in the digger backing the loan, the possible breach is reportedly the result of the recent weakness of Bumi's share price. With fears it will mean the family (whose dispute with Mr Rothschild led to the latter stepping down as co-chairman last month) may have to raise money through a disposal of some of its assets, Bumi was one of a number of companies with links to Bakrie to decline.

The family has faced such issues before – last year they sold part of their shares in Bumi for $1bn to escape a default – and some claimed the fall was an overreaction.

"I don't think the move is entirely rational. The last time this happened Bakrie sold shares at a big premium," said Liberum Capital's Richard Knights.

"I think the worst-case scenario is that they [Bakrie] would sell their stock with a call option attached so they could buy it back," he added. "They no doubt have many options and I think the chance of them losing their stake altogether is low".

The FTSE 100 – along with markets across Europe – started the week with a sharp sell-off, sliding 106.58 points to 5,665.57. With political events in the Netherlands and France, plus poor private sector data from the eurozone and Spain returning to recession, reviving fears over the region's debt crisis, Barclays and Royal Bank of Scotland dropped 9p to 204.55p and 0.89p to 23.13p respectively.

Figures from China's manufacturing sector did not help the heavyweight miners. Vedanta Resources was left with the Footsie's wooden spoon after sinking 70p to 1,167p, as Rio Tinto was pegged back 171p to 3,376p and Kazakhmys retreated 40.5p to 849p.

There ended up being just two blue-chip risers, including BSkyB. The satellite broadcaster edged up 4.5p to 679p despite Ofcom announcing it was investigating its Sky News channel regarding email hacking, with the group instead boosted by reports over the weekend talking down the prospect of Al Jazeera bidding for the rights to show Premier League football.

IAG nosedived 9.2p to 162.6p following last week's completion of its deal to buy bmi. In a last-minute change to the acquisition, the British Airways owner ended up with two of the regional airline's loss-making units, and IAG boss Willie Walsh yesterday admitted that he was "not confident" over being able to sell them.

Down on the FTSE 250, SuperGroup was still falling out of fashion following last week's profit warning. Despite its share price having shed nearly 40 per cent on Friday, yesterday it was off another 16.8p at 335p as analysts continued to make dramatic adjustments to their predictions.

Singer Capital's scribes slashed their target price by a huge 470p to 320p, saying that while they do not think "the brand is dead, we accept that until confidence in forecasts materially improves the stock has become uninvestable for many".

Cable & Wireless Worldwide shot up 12.19 per cent to 35.9p after its bid saga finally came to an end, with the telecoms firm agreeing to a 38p a share takeover offer from mobile phone giant Vodafone (0.1p worse off at 171.4p).

The subject of recent speculation, Kenmare Resources declined 4p to 50.9p after the Irish digger's boss Michael Carvill said over the weekend that he hopes the group is not taken over.

Having seen its share price come close to doubling last week on rumours that it was about to reveal a storming update from its drilling off the Falkland Islands, Borders & Southern did announce a find but it was not what the market was expecting. Instead of striking black gold, the explorer revealed it had discovered gas condensate, which – although often sold at a higher price – is more complicated to develop than oil.

In response, Borders slumped by 31.68 per cent to 89.5p on Aim, although there were plenty of supporters, with broker FoxDavies calling the news "a terrific technical success, and one that the company should be proud of".

At the same time, fellow driller Gulf Keystone Petroleum climbed 24p to 235p after announcing that the testing programme on its Shaikan-4 well in the Kurdistan region of Iraq had been completed, with the firm saying it was the "best well drilled to date".

Meanwhile, machine gun manufacturer Manroy was driven back 11.5p to 83.5p after admitting that a £8m contract had not yet been confirmed.