Bakrie's rubber dealer Lewis & Peat goes under

JAKARTA (JP): Natural rubber dealers Lewis & Peat Singapore and Lewis & Peat London, parts of the Bakrie Group, have decided to declare themselves bankrupt after failing to reach an agreement with their creditors, led by Rabobank, to rollover their due debt of US$60 million.

PT Bakrie Sumatera Plantations (BSP), which owns the two companies, said on Tuesday that the management of Lewis & Peat had also failed to find a strategic partner to save them from bankruptcy.

As a consequence of the bankruptcy decision, BSP said, all assets of Lewis & Peat (London and Singapore) would be up for sale, including their open positions in the commodity bourses which would result in losses from the unrealized gains of $6 million.

Earlier, Lewis & Peat Connecticut, also a unit of BSP, filed "Chapter 11" bankruptcy in the United States.

The three Lewis & Peat companies form the Lewis & Peat Group.

BSP said the bankruptcy of the Lewis & Peat Group would automatically write off all of its capital in the rubber dealer group.

In addition, BSP would have to book a provision of Rp 60 billion ($8.2 million) for the carrying value of its investment in Lewis & Peat Singapore and London.

BSP would also have to book another provision of Rp 50 billion to cover the current obligations of Lewis & Peat Connecticut.

Those provisions will be reported in the company's 1999 profit and loss statement.

"However, those losses will not affect the company's cash flow because the company has a lot of capital to cover the losses," BSP said.

BSP added that the bankruptcy of the Lewis & Peat Group would even benefit the company because it would be able to sell its rubber directly to its customers.

The Lewis & Peat Group sold around 25 percent of BSP's rubber last year.

However, BSP's consolidated sales would be affected by Lewis & Peat's bankruptcy decision.

Nevertheless, in the longer term, the disappearance of the Lewis & Peat Group from BSP's revenue consolidation would improve the company's profitability.

It noted that Lewis & Peat's profit margin was only between 2 to 3 percent, compared with BSP's profit margin of between 50 percent and 60 percent.

The Lewis & Peat group has been profitable for the last three to four years, but ran aground late last year after an audit revealed the use of short-term credit funds to finance long-term projects.

The Lewis & Peat group is independently financed by a syndicate group of banks.

As such, it will not be affected by the debt-for-equity swap that the Indonesian Bank Restructuring Agency (IBRA) helped to negotiate for the ailing Bakrie group. (rid)