You can see why PwC might feel nervous about Bumi, the Indonesian coal miner and FTSE 250 constituent. The accountant signed off the June 2011 prospectus for the creation of a business subsequently blighted by investor infighting and allegations of fraud. The recriminations appear to have sensitised the auditor, whose punctiliousness has resulted in Bumi delaying its annual results and suspending its shares.

This action is extremely unusual. Most companies report their numbers with clockwork regularity. Bumi’s inability to do so further undermines the credibility of a group whose board narrowly dodged removal by Nat Rothschild and other rebel shareholders in February. Suspension means there is no transparent price in the shares, leaving investors holding an illiquid investment.

Trading will not recommence on the London stock market until Bumi has dispelled the doubts that PwC has over Berau, its Indonesian subsidiary. The auditor is worried that ex-executives of Berau signed contracts with suppliers and customers that were never disclosed to the parent group. Quantifying these liabilities, if any, will take too long for Bumi to meet an obligation to report results within four months of the year-end.

Nick von Schirnding, Bumi chief executive, hopes to publish 2012 results in May. In June, investors should supposedly have the chance to vote on a proposal for the Bakries, a powerful Indonesian family, to buy out Bumi’s 29 per cent stake in Bumi Resources, another coal miner, in return for cash and the cancellation of their shareholding in Bumi.

Will everything happen to schedule? A pessimist would say that if anything can go wrong for Bumi, living embodiment of Sod’s law, it generally does.

Pressure is mounting on City advisers who brought foreign miners to list in London. Two of them, Bumi and Eurasian Natural Resources Corp, have become mired in corporate governance rows and allegations of wrongdoing. PwC is auditor to both.

Bleak expectations

Gerald Corbett has great expectations for Betfair, the gambling group he chairs, writes Kate Burgess.

For all the company’s failure to deliver on its early promise when it floated at £13 a share, he has rejected the 880p indicative approach from F1 owner CVC as insufficiently racy. He says Betfair has a good business, no need of private equity money and its new management team is midway through turning it round.

Mr Corbett’s utterances echo those he made as chairman of Woolworths, the pick’n’mix retailer which Apax approached with a marriage proposal eight years ago. First, Mr Corbett rejected the suit. Then, when the private equity house raised its putative bid above 58p, he opened Woolies’ books so that Apax could finalise funding, only for Apax to recoil sharply saying that it couldn’t “confirm key cash items”.

Woolies was left, like Miss Haversham, at the altar and Mr Corbett warned other executives against opening up to private equity Lotharios. His views haven’t softened much in the years since. That may be to investors’ advantage if playing hard-to-get drives CVC to lift its offer. But Betfair shareholders should bear in mind the grizzly fate of Miss Haversham and of Woolies, whose great expectations went up in flames. The shares never hit 58p again and investors who bailed out when Apax hove into view were the clear winners.

End piece

A debate as fierce as that between Lilliput’s Big Endians and Little Endians is brewing. The issue here is not which end of a boiled egg to crack, but the reform of London interbank offered rates. Hundreds of trillions of financial contracts are priced against these discredited benchmarks whose big weakness is their failure to reflect real borrowing activity.

A radical Little Endian faction is led by Gary Gensler, head of the US Commodity Futures Trading Commission. Intruding on the private grief of British hosts, he used a speech on Monday to argue for rapid replacement of Libor with lending benchmarks such as repo rates and overnight index swap rates.

The gradualist Big Endian cause is promoted by Martin Wheatley, boss of the UK Financial Conduct Authority. He has called for Libor to be reformed rather than replaced in the short term. In a report he found that swap rates lacked liquidity and that repo rates failed to reflect credit risk.

Despite their schisms, the Lilliputian debaters all wound up eating boiled eggs. Similarly, the end result of the Libor controversy will be the pricing of financial contracts against indices that, in differing ways, fail to reflect reality.


Get alerts on Bumi Resources Tbk PT when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article