Bahana in trouble collecting debts

Bahana in trouble collecting debts

Rob Delaney and Aloysius Unditu, Bloomberg, Jakarta

PT Bahana Pembinaan Usaha Indonesia, a state-owned holding
company that is late repaying US$400 million, is having trouble
collecting debts of its own.

In 1997, Bahana lent $47 million to Festival Company Inc., a
British Virgin Islands-registered company owned by timber tycoon
Prajogo Pangestu, said Bahana officials who didn't want to be
identified.

Now Prajogo says he won't honor a guarantee on the loan, used
to help buy a stake in a Philippine phone operator.

I'm "not a shareholder nor a beneficial owner of Festival
Company Inc.," he said in a letter to Bahana dated Jan. 29 that
was seen by Bloomberg News.

"Since the personal guarantee is no longer legally binding,
all obligations and rights attached to the guarantee
automatically drop."

The difficulties in resolving Indonesia's overdue debt, where
a weak legal system is discouraging investors, are making it
harder for the nation to pull out of its worst economic crisis in
decades. Indonesia has about $60 billion in overdue foreign
corporate debt still to be restructured.

In January, Bahana's debtors paid a quarter of the $400
million they owed the company and that had been due in December.
The company used the funds to make payment on some of its own
foreign-currency debt, and Bahana's debtors then negotiated a
six-month schedule to repay the remaining $300 million.

The Festival debt wasn't part of the amount repaid, and the
restructuring agreement was hammered out before Prajogo withdrew
the guarantee, possibly threatening the revamp accord.

Ignasius Jonan, Bahana's president director, declined to
comment. Prajogo wasn't available for comment.

Complicating Bahana's efforts to recover the debt, Festival
directors Loeki S. Putera and Jansen Wiraatmaja resigned on Jan.
29, the same day Prajogo denied he had any ties to the company,
according to letters obtained by Bloomberg.

Neither man could be reached for comment.

Festival's office is in Wisma Barito Pacific, Prajogo's
headquarters close to Jakarta's central business district.

Prajogo is president commissioner of PT Barito Pacific Timber,
which is fighting a petition by bondholders seeking its
bankruptcy after Indonesia's largest plywood maker missed a bond
payment on Jan. 10.

Prajogo owns 7.95 percent of Barito Pacific.

Proving the real owner of Festival will be difficult. Under
British Virgin Islands law, the identity of shareholders is
protected. Bahana will need an order from one of the tax haven's
courts to get that information.

Just what Bahana was doing lending money to offshore companies
is something Indonesian authorities may be asking Sudjiono Timan,
president director of the company from 1993 until February last
year.

Under Indonesian law, state-owned non-bank companies like
Bahana are not allowed to extend loans.

Bahana is a holding company that doesn't have any real
operations of its own. It controls three financial units, PT
Bahana Securities, fund management house PT Bahana TCW Management
and venture capital company PT Bahana Artha Ventura.

PT Bahana Securities arranged the sale of Rp 2.2 trillion of
bonds in the past two years for companies such as Indonesia's
largest cement maker, PT Semen Gresik and Indofood Sukses Makmur,
the world's largest maker of instant noodles.

Sudjiono is under house arrest and faces 20 years in jail for
his alleged role in Bahana's lending $210 million to companies
including Festival.

"The problem with Bahana is abuse by its previous owners,"
said Lin Che Wei, director of Socgen-Crosby Securities.