UPDATE 1-Troubled coal miner Bumi holds crucial board meeting


(Adds details of dinner meeting)

By Janeman Latul

SINGAPORE, Oct 11 (Reuters) - The directors of troubled BumiPlc , one of the world's largest thermal coalexporters, gathered for a board meeting on Thursday amid anuncertain future for the company created by British-bornfinancier Nat Rothschild and Indonesia's Bakrie family.

Allegations of financial irregularities, against abackground of weak coal prices and tumbling shares, havestrained already frayed relations between major investors in theLondon venture and fuelled speculation of a potential split.

The meeting was being held in Singapore and Rothschild,41-year-old scion of the Rothschild banking dynasty, was in thecity, sources close to the company said. They said the boardmembers had dinner together on Wednesday night.

The board includes Rothschild, Indra Bakrie, one of theBakrie brothers, and Samin Tan, an Indonesian billionaire whopulled the Bakries back from default last year with a $1 billioninvestment, only to watch the value of his shares crumble.

The Bakries and Tan each hold half of a 47.6 percent stakein Bumi Plc, while Rothschild owns 12 percent.

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The relationship between Rothschild and the Bakries, one ofIndonesia's most powerful and politically connected families,has soured over the past year, particularly after a leakedletter from the financier last November that called for a"radical clean-up".

The letter was seen as a sign of his frustration with theBakrie family, whose patriarch Aburizal Bakrie is an Indonesianpresidential candidate.

Tan and the Bakries pushed out Rothschild as co-chairman inMarch and Tan became chairman.

But relations have also frayed between the Bakries and Tan.

Sources have said Tan is "furious" with the Bakries afterwatching the value of his investment plunge -- the shares hebought are worth only one-ninth the level at which he came in.

The board meeting is the first since an inquiry intopotential wrongdoing at the group's Indonesian operations wasannounced last month.

The independent probe, being led by a London law firm andstill in progress, has revived worries over governance at BumiPlc and concerns over the woes of its debt-burdened affiliate,PT Bumi Resources , the jewel in the Bakrie empire.

Heightening tensions before the Singapore meeting, theBakries said on Wednesday that telephones and e-mail accountsbelonging to the family and its group of companies had beenhacked, pointing to unspecified "suspicions" over whom to blame.The incident has been reported to Indonesian police.


Most of the allegations of financial irregularity, expectedto total more than $500 million, relate to Bumi Resources, theflagship Bakrie miner and Indonesia's largest coal producer. Twoof three investments at the centre of the probe, though, havealready been written down to zero by the London parent.

"While we are not able to quantify the amounts involved inthese irregularities, we believe this investigation mayreinforce the idea that the company needs to address its complexcorporate structure," analysts at JP Morgan, the bank thatfostered the creation of Bumi, said in a note last month.

Bumi was listed in London last year via a reverse takeoverengineered by Rothschild that aimed to create an internationalcoal-mining powerhouse with operations in Indonesian Borneo, andone of the biggest listed companies on the London exchange.

The deal highlighted the promise of Indonesia, SoutheastAsia's biggest economy, which boasts some of the world's largestdeposits of coal, gold, copper, tin and natural gas, spreadacross an archipelago of 17,000 islands.

But banks and dealmakers looking for long-term investmentsin Indonesia must tread carefully around the powerful localconglomerate heads.

The Borneo coal mines at the heart of the deal once belongedto global energy companies Rio Tinto , BP and BHPBilliton , which sold them to the Bakries in 2001and 2003, after facing pressure from nationalists to divesttheir assets to local interests.

Sources familiar with the matter said Thursday's boardmeeting was a scheduled gathering, with a long-planned to-dolist - but top of the agenda will be progress made by lawyers ontheir probe, which could run into next month.

The meeting of the board members, 16 after the resignationof former CEO Ari Hudaya, is expected to include Chairman SaminTan, co-Chairman Indra Bakrie and Rothschild, and is thereforeunlikely to escape discussion on the future of the group.

At least one of the sources, though, said no restructuringcould be decided before the full investigation was completed.

Bumi Plc has long said it would like to bring together BumiResources, in which it owns 29 percent, and coal miner Berau, inwhich it owns 85 percent, into a single operating holding.

But options being considered by teams of advisers courtingBumi in recent weeks include more radical solutions, such as adivorce of Bumi Resources from the group.

Bumi Plc's board could also seek to replace Hudaya, who waschief executive until March and is still chief executive of BumiResources.

Two sources also said they could not exclude other changes.

(Additional reporting by Clara Ferreira-Marques in LONDON;Editing by Raju Gopalakrishnan)


Keywords: BUMI/