Mandiri balks at helping out debt-laden KKA<\/p>\n
Urip Hudiono, The Jakarta Post, Jakarta<\/p>\n
State-owned lender Bank Mandiri says it will likely turn down
\na recent request from the government for the country's largest
\nbank to inject fresh capital into ailing state-owned paper
\nproducer PT Kertas Kraft Aceh (KKA).<\/p>\n
Bank Mandiri president director E.C.W. Neloe told reporters on
\nMonday that though the bank was still in talks with the Office of
\nthe State Minister for State Enterprises -- which oversees state-
\nowned companies -- on how to help out KKA, the option of pumping
\nmore funds into the firm would be difficult for Bank Mandiri to
\naccept.<\/p>\n
"I don't think it would be possible for us to inject more
\nfunds into KKA given the company's current situation," he said.
\n"It would also be too much of a burden to extend their loans."<\/p>\n
The Office of the State Minister for State Enterprises had
\npreviously asked Bank Mandiri to explore the possibility of
\ninjecting fresh capital of Rp 200 billion (US$21.5 million) into
\nKKA to prevent the paper firm from collapsing.<\/p>\n
According to reports, the office recently told the House of
\nRepresentative's Commission VI for industry, trade and state
\nenterprises that KKA would need some Rp 200 billion in fresh funds to
\nrestart its operations after its management decided to
\ntemporarily halt the company's operations in April 2003.<\/p>\n
KKA currently has debts totaling Rp 300 billion, of which Rp
\n165 billion are classified as bad loans by Bank Mandiri.<\/p>\n
Neloe explained that the option of injecting fresh capital was
\nsimply too onerous to be feasible as KKA's current asset value of
\nbetween $30 million and $40 million at the most was insignificant
\ncompared to its outstanding debts.<\/p>\n
Neloe further explained that Bank Mandiri had previously
\nhelped KKA out with bailout funds to the tune of Rp 150 billion,
\nbut this rescue effort had failed due to serious operational
\nproblems resulting from the turning off of gas supplies.<\/p>\n
Neloe therefore suggested other solutions to the KKA fiasco,
\nsuch as simply putting the company up for sale.<\/p>\n
The request to inject more funds into KKA would likely put
\nMandiri at risk, as well, as there was a very real possibility
\nthat KKA would default. The level of non-performing loans (NPLs)
\nat Mandiri during the third quarter of 2004 remained stubbornly
\nhigh at 7.49 percent, above the ceiling of 5 percent set by Bank
\nIndonesia.<\/p>\n
Meanwhile, State Minister for State Enterprises Sugiharto said
\nthat the government was still considering inviting foreign
\ninvestors to take a stake in the firm.<\/p>\n
Sugiharto, however, admitted that there were no specific
\ninvestors on the cards as yet and that the government was still
\ndrawing up a shortlist of potential rescuers.<\/p>\n
KKA ceased operations as it was unable to secure gas supplies
\nto fuel production. Gas supplies to the company were cut off
\nafter U.S. energy giant ExxonMobil refused to continue supplying
\nit following KKA's failure to pay an outstanding gas bill of Rp
\n65 billion.<\/p>\n
ExxonMobil's contract to supply gas to KKA is due to run until
\n2008.<\/p>\n
KKA employs 1,035 workers and has an installed capacity of
\n135,000 tons of packaging paper per year, of which most is sold
\nto local cement companies. The firm stopped paying its workers
\nlast year.<\/p>",
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