Article Vallar: raising the stakes (update 1)

The next stage should further strengthen the Jakarta camp's hand when the non-Indonesian owners of 15 per cent of Bumi Resources are offered a swap into Bumi Plc stock.

The offer is expected to accompany a June 17 prospectus for Bumi Plc's "prime listing" on the London exchange. The London company wants to hold 50 per cent of Bumi Resources by the end of the year.

Nirwan acknowledges the London listing requires far higher levels of disclosure and standards of governance than Indonesian investors are able to demand. Even so, Bakrie companies have had numerous scrapes with tolerant local regulators.

But Vallar also offers the prospect of respectability that opens doors in international finance.

"Yes, (already) there's more people coming to see us from the equity side," Nirwan says. "But from the debt side . . . more banks want to talk of course, but we're not having any problems now."

What opens bankers' doors best is a sharp reduction in the group's towering debt load. Nirwan is intent on slicing both borrowings and debt structure.

Bumi Resources management has targeted $US500m to $US600m of asset divestments this year and are back in talks with China Investment Corporation about restructuring its $US1.9bn debt holding.

Until now, the Chinese fund has been too satisfied with its 12 per cent coupon to consider offers of a part-swap into Bumi Resources stock.

Bakrie has given notice it will repay $US600m in October, a year early, and Nirwan says the issue of swapping more debt into Vallar stock hasn't arisen. . . yet.

As to Australian objects of interest, besides the A-League Nirwan is keeping his own counsel for now.

He points out, though, that his family has a history of working with Australian companies, going back to the days of his father, Ahmad Bakrie, founder of the business dynasty.

"We know for sure that we've been able to work with Australian parties for years," he says.

Bakrie Tubemakers began life almost 40 years ago as a pipe-making joint venture between Bakrie and Brothers and Tubemakers of Australia, while Bakrie Construction was a collaboration with Transfield.

Both are now wholly owned by the group, which recently brought Brisbane company Panax Geothermal into Bakrie Power's first Java geothermal development.

But there are plenty of Australian coal people, too, who are already familiar with the East Kalimantan mines now forming the spine of the new Bumi giant.

Kaltim Prima Coal was once a subsidiary of the former CRA, now Rio Tinto, which developed the biggest East Kalimantan mine and port operation with BP in the late 1980s. BHP, before it had Billiton appended, built the PT Arutmin operations.

Bakrie and Brothers joined both projects as minority partners.

It was explicit in their contracts of work with the Indonesian government that the foreign partners would have to sell down in stages to local firms.

But at one point, in 1997, Bakrie appeared keener to sell, at least from Arutmin.

However, faced with a requirement to sell 51 per cent to a local enterprise, BHP Billiton sold out wholly from Arutmin in 2001.

Rio-BP left Kaltin Prima in 2003, ending a spectacular two-year struggle between some of the nation's most powerful business families, officials and provincial and district governments.