Bakrie & Brothers's Debts

After the commotion caused by Mr. Hary with its BHIT, this time Bakrie re-emerge after Telkom stated that they would merge Flexi with BTEL’s Esia. Many people suspect that this merge will only bring benefit to BTEL, and inflict a financial loss to TLKM. The reason? It is because BTEL is considered to have lot of debts, where the half of those debts sould be borne by TLKM if the merge is actually made. In addition, BTEL’s owner, Bakrie himself indeed has lots of debts. That also causes Bakrie Seven Brothers (B7) to not rise although its transaction volume was lively lately. The question is, how much Bakrie’s debt today?

We won’t be able to know precisely how much Bakrie’s debts, because there are no data to support that. Or maybe there are data, yet it does not open to public. However, we can get a depiction by analyze the account payable that is recorded by the hosting company of BTEL and other B7’s members, BNBR. In general, BNBR’s debts in First Quarter 2010 are indeed great. The total is amounted to Rp23.9 trillion. That amount increase up to 68.7% compared in same period of 2009. Whereas BNBR’s equity value is only Rp5.4 trillion, declining 28.3% from 2009, so that its DER is amounted to 4.4 times, which makes BNBR as (probably) the largest debtor in IDX.

A healthy company, is ideally have less liability's value than the value of equity (DER is below 1). Actually there will be no problem if the liabilities are larger than the equity, yet the tolerance limit must be between 2.0 - 2.5 times. If it is exceeded 3.0 times, then you need to think twice to buy the issuers’ stock for the long run, because even the banks is almost certainly to reject if the company in question asking for a loan. Then, what if the value is already above 4.0 times like BNBR?

Most of those liabilities that are amounted to Rp23.9 trillion, indeed include threatening debts. The short-term debts rose from Rp1.2 trillion to Rp4.0 trillion. Its long-term debts also rose from Rp6.8 trillion to Rp8.1 trillion. As for the bonds' payable, rose from Rp2.4 trillion to Rp3.4 trillion. Such an incredible amount, isn’t it, considering those amounts is in trillions, not in billions let alone millions of Rupiah. I wonder what have been done by BNBR in the last several years so that the debts can reach that amount.

If we look at its equity value, then we will find another interesting fact. BNBR’s equity that is amounted to Rp5.4 trillion, consists of paid-in capital amounted to Rp21.5 trillion, additional capital amounted to Rp24.5 trillion, difference in the value of equity transactions minus Rp22.6 trillion, minus Rp19.9 trillion of deficit, and others. If those are summed up, the total is Rp5.4 trillion. Well, so what’s interetsing? Note the additional paid-in capital point. The amount is very big, reach up to Rp24.5 trillion. If this point does not exist, then BNBR’s equity will be minus Rp19.1 trillion aka capital deficiency. What happens if there is a company that has minus US$ 2 billion of net equity? Fortunately, there is the additional paid-in capital. I wonder where that money came from.

In addition, it turns out that the money is obtained from the difference between funds received from the public offering and the conversion of debt into shares. Note the bolded part: Some of those Rp24.5 trillion of capital are obtained from the debt conversion. It means that some of the additional paid-in capital was actually derived from debt too!

In addition, it seems that BNBR’s debt will still increase. On April 1, 2010, BNBR established a subsidiary in Singapore (not mentioned what the name is), in order to obtain domestic loans. A week later, on April 7, 2010, BNBR’s subsidiary namely Bakrie Petroleum International Pte Ltd, established a subsidiary namely Alphard Capital Ltd in British Virgin Island. This company was also built to obtain foreign loans.

And.. this is the long-awaited one. On May 7, 2010, BNBR’s subsidiary, namely Bakrie Telecom (BTEL), issuing bonds payable amounted to US$ 259 million or Rp2.4 trillion, to pay the debt to Credit Suisse (so they indebted to pay the debt), and for capital expenditure. Because the issuance of the bonds payable is done after March 31, 2010, then that Rp2.4 trillion is not included in BNBR’s total liabilities amounted to Rp23.9 trillion that have been mentioned above.

If the two newly-established subsdiaries are managed to get the foreign debt, and that Rp2.4 trillion of debt are added into the balance sheet, then approximately how much BNBR’s debts in the second quartal? As information, another BNBR’s subsidiary, BUMI, also also get additional debt in total of US$ 125 million or Rp1.2 trillion on April 30, 2010 from UBS Bank and Deutsche Bank Singapore.

So approximately how much is Bakrie’s debt? I do not know, but clearly, it was 'fairly' big.

Original article was written on June 10^th, 2010.