Merrill lost in Indonesian court

South Jakarta District Court ordered Merrill Lynch Indonesia to pay US$25 million compensation to Harjani Prem, owner of Renaissance Capital. 

According to the verdict, Merrill had illegally sold shares, committed defamation against Prem in filing report to Bapepam (capital market supervisory agency) without strong legal evidences, and illegally hiring private investigators.

Merrill's lawyer, Frans Hendra Winarta, said his client will appeal to High Court to challenge the verdict.

Winarta argued there was no legal relationship between the company that sold shares in Singapore and Indonesian parties. He can't understand why a report to Bapepam is considered as defamation. 

At the center of this case is Merrill's approval to provide loans to Prem to purchase the shares of PT Triwira Insan Lestari (TRIL) Tbk. Merrill called off the loan, and asked Prem to pay in cash US$14.4 million the shares. Merrill then offloaded the shares to other parties.

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Bumi buyback & Lapindo divestment

PT Bumi Resources Tbk has started shares buyback late last week with initial purchase of around 9 million shares at Rp760-770/share. Bakrie-linked brokerage firm PT Danatama Makmur was the agent for the buyback. Plenty more to follow, 1.9 billion shares with total value around US$250 million.

Meanwhile, PT Energi Mega Persada Tbk told JSX yesterday that it's looking for financing of Lapindo Brantas Inc loans related to US$120 million notes issued by Malacca Brantas Finance BV.
Under the divestment plan, Energi needs to settle third party loans chanelled to Lapindo Brantas. Energi has signed sales & purchase agreement (SPA) with Bakrie Oil and Gas Limited, in which Bakrie would pay US$2 for Energi shares in Lapindo.
Lapindo Brantas Inc has six development wells and five exploration wells. In the first half 2006, Lapindo contributed 15% of Energi's total revenue.
According to Energi, total losses calculated at Lapindo's well blast that turned into a disaster could reach US$106 million. Based on Section VI of PSC agreement, Lapindo claimed it deserved cost recovery from government. Insurance coverage is reported at US$27.5 million.
So far, Lapindo got Rp109.2 billion funding from Energi's IPO and another Rp19.7 billion from a rights issue. On top of these, Lapindo also got loan from the US$120 million notes arranged by Merrill Lynch. It's not clear how much loan chanelled to Lapindo.
Malacca Brantas Finance BV issued the 3-year LIBOR plus 8%-8.5% loan to refinance US$50 million loan to PMA Investment Advisors Ltd and Bank Mandiri, while the remaining US$70 million to finance Malacca PSC and Brantas PSC.
"According to SPA, one of the requirements is to settle all third party debts. For that purpose, we're in the process to get financial resources," Energi told JSX.
So, it's clear, Energi could safely walk away from Lapindo disaster, leave it to government to recover all the cost incurred, and the environment for the unstoppable mudflow.

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Mud therapy USD150/hr, Merrill & Greenpeace

No kidding. A geologist from European country confirmed earlier skepticism that Lapindo Brantas Inc would ever stop the mudflow in Sidoarjo, East Java. He suggested the alternative future of the area, just like what initially believed as mere joke, for mud therapy. The difference, this time at a price, say the Ayuverda's Lepana (herbalized mud treatment) could cost US$150/hour.
A cabinet meeting tonight will make decision on whether to dump the mud to the sea, open new business opportunity like SPAs, or make it national park like Yellowstone.

Public Utilities minister Djoko said, "it's better to save people's lives than fish," a sign that most likely president SBY would let Lapindo offload the mud to Madura sea.
Greenpeace had poured some liters of the mud in front of Aburizal Bakrie's office (as minister) today. But this NGO needs several tankers/vessels to ship the mud from Sidoarjo to Bakrie & Lapindo offices.
Stock Market authorities stunned with US$2 price tag on Lapindo Brantas Inc's asset to be sold to Bakrie Group. Not to mention Merrill Lynch's US$120 million loan arranged to finance Brantas production sharing contract (PSC) operated by Lapindo. It's a hell of pain for creditors to think of Lapindo's new owner financial liabilities amid growing victim's claims.
Still, creditors believe in this group. An investment banker said it almost certain Bumi Resources would get US$1.2 billion, the amount exactly it needed. Well, the new owner of Lapindo would make more money out of the Ayuverda thing.

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Farallon-Rajawali to acquire Bumi assets?

PT Bumi Resources Tbk is reportedly engaged in a negotiation with a new alliance of a global fund manager & Indonesian conglomerate to replace PT Borneo Lumbung Energi as the buyer of its assets (PT Kaltim Prima Coal, PT Arutmin Indonesia, and PT Indocoal) with financial back-up from Credit Suisse.

Rumors in the investment bankers circle said Farallon Capital is reportedly the global fund manager, while the Indonesian group is Rajawali Corporation. Both companies---allied in the acquisition of Cemex SA shares at PT Semen Gresik---denied the rumor.
"They are working together to try to do that. But I don't think they will succeed...," an investment banker in Singapore said. He said JP Morgan, which also involved in the Cemex deal, approached Farallon-Rajawali. JP Morgan, an advisor for Bumi in the collapsed US$3.2 billion deal with Borneo, also denied the negotiation and rumor of the close relationship between JP Morgan and Farallon Capital.
JP Morgan helped Willow Finance (a vehicle owned by Bakrie family) in the issuance of US$205 million facility linked with Willow's shares in Bumi, exchangeable at Rp500/share. Farallon was the key financier for Bakrie family when they bought KPC from Rio Tinto through Merrill Lynch. Farallon also lent huge amount of money to Berau Coal investors when they bought the company from Astra.
Why doubt?
"It's too big even for them. They also don't have the operational expertise in coal mines. Besides, they already bussy with very ambitious goals for the company they just bought recently," he said.
Are they interested in buying minority stakes?
"No I doubt. These guys are only interested in if they can take the whole thing."
So, I other friends-analyst about Rajawali's chance.
"Where you got the information from? Let me check. But from what I read in the newspaper, with EBITDA below US$300 million in the first half, the assets would have low price. I don't think Bumi would proceed with the divestment."
Well, the poor EBITDA news is considered by some as the door to wage a hostile takeover. (By whom?)
What if Bumi cut the price?
"I think Bumi won't do that because it will send negative sentiment to the company's shares. Even if they do that Borneo has the biggest chance because the deadline for their the sales and purchase agreement (SPA) actually by the end of this month."
How serious? Could it be just part of efforts to boost market sentiment ahead of JSX's plan to lift the suspension on Bumi shares trading? Or to save the hedge funds who bought Willow Finance EB?
But, hostile takeover?
"I think, the Bakrie family is vulnerable to investors. If Bumi shares plunge, it would make sense for Willow bondholders to exchange into shares...sensing that, I wouldn't be surprised if the family is becoming defensive. I know some people out there would resort to hostile measures," said a senior analyst.
Tired or bored with the issue, go to Porong, Sidoarjo, enjoy the hot mud treatment there! They have new entertainment there...mud wrestling!

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Mulpha to acquire Nursalim's Grand Hotel

Mulpha (SPV 1) Limited, a wholly owned subsidiary of Mulpha Australia Ltd has made an off-market cash offer to acquire all the securities on issue of Grand Hotel Group, a subsidiary of Singapore-listed Tuan Sing Holdings controlled by Sjamsul Nursalim family.

GHG Chairman William J. Conn told Australia Stock Exchange (ASX) on Friday that GHG had appointed Merrill Lynch and Freehills as its advisors for the transaction. No details available on the value of Mulpha's offer.
Grand Hotel Group (GHG) is the leading owner of 5-star hotel properties and is the second largest accomodation owner in Australia. Mulpha is controlled by Lee Ming Tee and his son Lee Seng Huang.
Tuan Sing's primary business activities are property, industrial services, retail and technology. The Group has over 80 subsidiaries and associates, with a workforce of more than 3,400 employees operating in various countries in the Asia Pacific region.
Tuan Sing reported total revenue of S$194 million in the first half 2006, increased 47% from the same period last year.

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Indonesia names UBS, JP Morgan, Barclays as lead managers for global bond sale

The government has named UBS, Barclays and JP Morgan Chase as the lead managers for its global bond issue this year, the Finance Ministry's director general for the state treasury, Mulia Nasution, said.

That would be the first time for Barclays to sell Indonesia government global bonds and the second for both UBS and JP Morgan. The size and timing of the bond sale have yet to be decided, but the proceeds will be used to help cover the state budget deficit and refinance maturing bonds.
Last year the government sold 2.5 billion US dollars worth of global bonds. On October 6, 2005, Indonesia government sold USD 1.5 billion in dollar-denominated global bonds comprised of USD 900 million in 10-year bonds at a yield of 7.6% and USD 600 million in 30-year bonds at a yield of 8.6%. The 10-year and 30-year bonds have a spread of 3.3% and 4.1% respectively over comparable US treasuries. Citigroup, Credit Suisse First Boston and Merrill Lynch were the lead managers.
In April 2005, Indonesia issued global bonds at the amount of US$1 billion matured 2015 with yields 7.435/7.323 percent. Citigroup, Deutsche Bank, and UBS Investment Bank were the lead managers for the transaction.
Indonesia reentered the international market in March 2004 with the issuance of US$1 billion worth of global bonds with coupon rate of 6.75%. JP Morgan and Deutsche Bank were the lead managers.
The government's foreign debts which will mature in 2006 will total 91.71 trillion rupiah (US$10 billion), comprising principal debt of 63.69 trillion rupiah and interest of 28.02 trillion rupiah. Domestic debts or government bonds which will mature in 2006 will reach 74.93 trillion rupiah. They comprise 26.32 trillion rupiah in principal debts and 48.61 trillion rupiah in interest.
The nation's total foreign debts in March 2005 reached 1,282 trillion rupiah or 52 per cent of the gross national product. They include foreign exchange debts of 624 trillion rupiah and debts in the rupiah of 658 trillion rupiah). Of the total debts, 647.7 trillion rupiah consist of state bonds, domestic state bonds of 624.2 trillion rupiah and foreign bonds of US$2.4 billion.
Last year, Paris Club of creditor nations offered an unconditional freeze on debt repayments for Indonesia, the Seychelles and Sri Lanka to help them rebuild their ravaged coastlines after the tsunami that struck on Dec. 26, 2004. Without the debt waiver, Indonesia would have to pay more than US$3 billion in principal alone last year.
Late last month, the finance ministry decided on debt management strategy, that in order to lessen the burden, government should carry out re-profiling (lengthening the maturity of payments).

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