Finger-pointing begins over Kanindotex takeover<\/p>\n
JAKARTA (JP): Officials and executives started pointing
\nfingers yesterday in relation to a controversial takeover of a
\ntroubled textile group, Kanindotex, by a politically well-
\nconnected consortium.<\/p>\n
"I'm disappointed and appalled... The ministry of cooperatives
\nand the ministry of finance did not give the Indonesian Batik
\nCooperatives Federation (GKBI) a chance to run Kanindotex," Sri
\nEdi Swasono, chairman of the Indonesian Cooperatives Council and
\na senior staff-member of the National Development Planning Board,
\ntold reporters after meeting with President Soeharto at the
\nMerdeka Palace here yesterday.<\/p>\n
Sri Edi said he did not, however, discuss the Kanindotex issue
\nwith the President.<\/p>\n
Despite a four-year contract granted last year by the finance
\nministry, the GKBI was completely ejected from the management of
\nthe Kanindotex textile group on Tuesday.<\/p>\n
GKBI won the contract last year after Kanindotex, which owns
\nthree mills in Central Java employing more than 10,000 workers,
\ndefaulted on loans totaling Rp 1.3 trillion (US$585 million) from
\ntwo state-owned banks, Bank Bumi Daya (BBD) and Bank Pembangunan
\nIndonesia (Bapindo).<\/p>\n
Executives of GKBI said recently that the federation had
\nincreased the group's net sales to Rp 115 billion (US$51.6
\nmillion) per month and achieved a profit of Rp 24.5 billion
\nduring the first three months of this year, although some
\nadditional debts were incurred in the early days of the rescue
\nprogram.<\/p>\n
The two banks said on Tuesday that GKBI, which had expressed a
\nwish to buy some shares in Kanindotex and to retain its
\nmanagement, had voluntarily withdrawn from the takeover process
\non May 5.<\/p>\n
After months of delay, reportedly due to an objection from the
\nfinance ministry, Kanindotex is now 90 percent owned and fully
\nrun by PT Apac Century Corporation, a consortium headed by
\nBambang Trihatmodjo, President Soeharto's second son, who
\nchairs the Bimantara conglomerate.<\/p>\n
Bambang's consortium acquired Kanindotex's listed subsidiary
\nPT Mayatexdian earlier this year through a direct-placement
\ntransaction at a price estimated to range between $26 million and
\n$32.52 million.<\/p>\n
Since neither BBD nor Bapindo won a controlling stake in
\nKanindotex, the government will not be able to closely supervise
\nfinancial developments in the troubled group.<\/p>\n
The consortium secured a remarkably low 11 percent annual
\ninterest rate from Kanindotex's creditors, compared with a market
\nrate of about 20 percent per annum, under which it is to repay
\nthe bulk of the textile group's debts within eight years.<\/p>\n
Overrated<\/p>\n
In the meantime, Minister of Cooperatives and Small
\nEnterprises Subiakto Tjakrawerdaya was quoted by Antara on
\nThursday as saying that GKBI's management and financial prowess
\nhad been overrated by the public.<\/p>\n
"That cooperatives federation is not yet perfect, so it cannot
\nrestructure Kanindotex's debts... This is also realized by GKBI's
\nmanagement," Subiakto said during a meeting of the Association of
\nYoung Businessmen in Jakarta.<\/p>\n
The minister denied failing in his duty to promote the
\ndevelopment of cooperatives in connection with the takeover
\nissue.<\/p>\n
GKBI's president, Noorbasha Djunaid, was not available for
\ncomment yesterday.<\/p>\n
Minister of Finance Mar'ie Muhammad has yet to comment on the
\nlatest chapter in the Kanindotex saga.<\/p>\n
Financial loss<\/p>\n
In the meantime, banking and business analyst Laksmana Sukardi
\nwarned yesterday that GKBI's "defeat" in the Kanindotex takeover
\ncould translate into a long term financial loss for the
\ngovernment, which owns the two creditor banks.<\/p>\n
"The government should let GKBI, which has a good management
\nrecord, manage Kanindotex and allow the creditors to inject
\nequity into the troubled project," he told The Jakarta Post by
\nphone.<\/p>\n
In so doing, all of the debts owed by Kanindotex could be
\n"translated" into equity, which could eventually be sold to the
\npublic in an offering, he said.<\/p>\n
"That strategy could generate capital gains for the
\ngovernment," Laksmana said.<\/p>\n
"But what we have now is that the banks must subsidize Apac
\nCentury by extending loans with an annual interest rate of 11
\npercent... The banks will suffer high funding costs since those
\nKanindotex debts were originally given out at a much higher
\nrate," said the analyst, who is a former banker.<\/p>\n
"On top of it, the capital gain opportunity has been reaped by
\nApac Century, which already controls Mayatexdian, Kanindotex's
\nlisted affiliate," Laksamana said.<\/p>\n
He said he was convinced that Apac Century would soon merge
\nwith Mayatexdian through a back-door listing.<\/p>\n
"Of course they will do it, it is the most logical move," he
\nsaid.<\/p>\n
No Apac Century executives were available for comment
\nyesterday.<\/p>\n
Laksmana blasted Subiakto's statement which, the analyst said,
\n"belittled the cooperatives movement."<\/p>\n
"How can he say such a thing? I thought it was his job to
\ndevelop cooperatives. Doesn't our constitution say that
\ncooperatives are the backbone of our economy?" (hdj)<\/p>",
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