Bank Mandiri unfazed by Semen Padang's threat

The Jakarta Post, Jakarta

Despite a lawsuit threat, state Bank Mandiri insisted on Tuesday it would not lend cementmaker PT Semen Padang the money it needed to repay maturing debts unless the company obtained approval from its parent company, PT Semen Gresik.

"Prior to releasing the funds, Bank Mandiri has the right to cancel the loan disbursement," said the bank's corporate secretary Koen Sardjono Sadrie in a media statement.

The statement came following an earlier threat from Semen Padang lawyer Adnan Buyung Nasution that the company would sue Bank Mandiri for reneging on its commitment to lend the company some Rp 500 billion (US$55 million). The loan was initially approved in June.

The West Sumatra-based Semen Padang, which is 99.99 percent owned by state-owned Semen Gresik, has said that it does not require shareholder approval to borrow money.

Semen Padang, which needs the loan to repay debts, is required to pay Rp 224 billion in six-month-term notes to state-owned social security firm Jamsostek and some Rp 270 billion to ABN Amro Bank due on Aug. 20.

Semen Padang could eventually be declared bankrupt if it defaults on the loans.

The company is seen as a rebellious subsidiary of Semen Gresik as it has been campaigning for a total spin off from the parent company since 2000 as part of efforts to foil attempts by the central government to privatize the state-owned cement operation.

Some reports have quoted Semen Padang officials as saying that the decision by Bank Mandiri to suspend the loan disbursement was made following intervention from senior officials at Semen Gresik.

There has also been speculation that the Office of the State Minister of State Enterprises could be behind the Bank Mandiri loan suspension.