In a research note published this morning analysts at Nomura have sharply downgraded their view of London-listed diversified Indonesian miner Bumi plc to reflect the short-term distressed nature of the company´s finances following its recent corporate governance travails.

To use their own words: "In the short term, the market is also likely to focus on credit concerns at 29% associate PT Bumi.

Loans from PT Bumi to ReCapital of approximately $340m have yet to be repaid, adding to the group's balance sheet issues. PT Bumi had circa $4.1bn in gross debt and $230m in gross cash at the end of the first half of 2012. We estimate that PT Bumi needs an average Newcastle thermal coal price of over $ 95/tone (versus spot of approximately $87/tonne) to cover its estimated 2013 interest expense."

As well, points out Nomura. "Concerns have resurfaced around the Bakrie's (24% shareholder in Bumi plc) $440m Credit Suisse debt facility. PT Bakrie's entire shareholding in Bumi plc is pledged against the loan. This has led to concern in the market that failure to repay or top up the facility could create additional uncertainty for the group."

Due to all of the above Nomura has seen fit to downgrade shares of Bumi to Reduce (from Neutral), while at the same time lowering their target price to 175p from 750p, as they have changed their valuation methodology to 0.5 times price/net-present-value at spot commodity prices to reflect the distressed nature of PT Bumi.

As of 11:56 shares of Bumi are bouncing back slightly, by 5.01% to 7.4p.

AB

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