Bank Mandiri begins talks with investors on pulp mill sale

Bank Mandiri begins talks with investors on pulp mill sale

Dow Jones, Singapore

Bank Mandiri, Indonesia's biggest lender, has begun talks with the family behind the US$14 billion Asia Pulp and Paper default and other potential investors over buying a Kalimantan pulp mill at the center of a dispute between J.P. Morgan and a Singapore- listed company, the Financial Times reported on its Website on Friday.

J.P. Morgan and United Fiber System Ltd. announced in June that they planned to take over the dormant Kiani Kertas pulp mill from a consortium led by Prabowo Subianto, the former son-in-law of Suharto, in a deal worth $600 million in cash and debt.

According to FT, that deal fell apart in August, leading to J.P. Morgan and UFS each trying to negotiate their own deal with Prabowo. J.P. Morgan, Kiani's biggest foreign creditor, on Thursday threatened legal moves to declare the company bankrupt if the deal to sell the paper mill proved unsatisfactory.

Since August, UFS, which has begun operating the mill under a temporary contract, has emerged as the apparent favorite.

Mandiri, Kiani's biggest domestic creditor, is understood to be growing concerned that the talks may go nowhere.

"If a good result does not happen shortly we will do something more actively," Ekoputro Adijayanto, Mandiri's corporate secretary, said in the FT report. "There are many investors that are really, actually, interested in buying Kiani Kertas."

Among those, Adijayanto said, was the Sinar Mas group, the holding company behind APP. Gandhi Sulistiyanto, a senior Sinar Mas executive, denied the group was interested in Kiani Kertas.

So, too, did a prominent member of the Widjaja family, which controls Sinar Mas.

But Adijayanto said "very preliminary" negotiations had been held with representatives for Sinar Mas and other investors.