Tycoon Bakrie Reels as Crisis Hits Home

JAKARTA ~ Just months ago he was the undisputed king of Indonesia’s tycoons, but now powerful Welfare Minister Aburizal Bakrie is struggling to hold together an empire crumbling in the global credit crunch.

The 62-year-old billionaire, a key financier of President Susilo Bambang Yudhoyono and his coalition partner Golkar, is fast losing his once-formidable political clout as stocks across his empire plummet, analysts said.

“Bakrie has lost his tenure as a major political heavyweight,” political analyst Dewi Fortuna Anwar said.

Yudhoyono probably still feels indebted to Bakrie for bankrolling his 2004 presidential campaign, but the swaggering tycoon’s influence ultimately relies on how much money he can shell out to his political allies, Anwar said.

“He’s now a minister, but if by (the general elections of) 2009 his financial issues can’t be overcome… he may be seen as a political liability,” he said.

Until recently, Bakrie was considered the richest man in Indonesia with a family fortune estimated by Forbes Asia magazine at US$5.4 billion, from holdings that span palm oil to coal and construction.

But as the US credit crunch turned into a global crisis, the spectacular commodities boom that fuelled the Bakrie family’s profits went rapidly south.

His debts piled up, banks stopped lending and creditors started selling shares offered as collateral by holding company Bakrie & Brothers, economists said.

Trading in stocks in six Bakrie-linked companies was suspended in early October after they lost between a quarter and 40 percent of their value in one day.

With around $1.2 billion in debt to maintain, Bakrie & Brothers is now scrambling to sell a 35-percent share in coal giant Bumi Resources, the world’s largest exporter of thermal coal and a prized money-spinner in the Bakrie empire.

The likely buyer is private equity group Northstar Pacific Partners, the Indonesian affiliate of Texas Pacific Group, which is in talks to pick up the stake for $1.3 billion.

Analysts said that even though his political star is falling almost as fast as Bumi’s share price – which has plunged more than 50 percent since the trading suspension was lifted in early November – Bakrie is still able to call in some big favours from his friends in politics.

Yanuar Rizky, an analyst with the Aspirasi Indonesia Research Institute, said Bakrie used his political connections to freeze trade in Bumi shares for a month as Bakrie & Brothers cobbled together the Northstar deal.

“It’s very clear this was an intervention by the government… it broke the law,” Rizky said.

Stock exchange chief Erry Firmansyah denied there was any political interference behind the suspension.

The trading halt was only lifted after well-respected Finance Minister Sri Mulyani Indrawati, formerly of the International Monetary Fund, reportedly threatened to resign in a tense meeting with Yudhoyono.

An $824.67-million buyback plan announced by Bakrie & Brothers last week slowed – but did not arrest – the decline in Bumi shares.

The stock tumbled another 9.5 percent to Rp1,050 on Monday after Bakrie & Brothers confirmed it had defaulted on Rp144.9 billion ($12.5 million) of short-term loans to two local companies.

While many here have relished watching Bakrie get snapped like a twig in the global economic maelstrom, Econit Advisory Group economist Hendri Saparini warned that the source of his empire’s troubles – the end of sky-high commodity prices – signals tough times for the broader Indonesian economy.

“Sixty percent of Indonesian exports are reliant on commodity prices. So when prices are declining, it’s a problem,” she said.

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