Consortium prevails in Kanindotex takeover

Consortium prevails in Kanindotex takeover

JAKARTA (JP): The protracted saga of the Kanindotex Group
takeover ended last night as a consortium lead by businessman
Bambang Trihatmodjo, President Soeharto's second son, secured all
of the troubled textile group's controlling shares as well as its
management.

"From this moment on, the consortium has formally become the
proprietor and manager of Kanindotex," Bambang, who is a major
shareholder of the Bimantara conglomerate and treasurer of the
ruling political group Golkar, told reporters after final
negotiations concluded last night.

The meeting, which began in the afternoon, was attended by
members of the consortium, top executives of Kanindotex's
creditors -- state-owned Bank Bumi Daya (BBD) and Bank
Pembangunan Indonesia (Bapindo) -- as well as Noorbasja Djunaid,
chairman of the Indonesian batik cooperatives association (GKBI),
which was assigned by the Ministry of Finance last year to run
Kanindotex after it defaulted on Rp 1.3 trillion (US$585 million)
in loans owed to the two state banks.

Yesterday's meeting, which lasted almost three hours, resulted
in a clear victory for Bambang's consortium, called PT Apac
Century Corporation. The consortium now controls 90 percent of
Kanindotex's shares as well as its management responsibilities.

The meeting's press release, which was jointly signed by the
presidents of BBD and Bapindo, stated that the consortium had
"promised" to allocate the remaining 10 percent of the shares to
a group of cooperatives not associated with GKBI.

Bambang's consortium had already acquired a 70 percent stake
in Kanindotex's listed subsidiary PT Mayatexdian early this year.

The outcome of yesterday's meeting has put an end to the calls
from various parties that GKBI, Kanindotex's present caretaker,
maintain its management control over the textile group.

GKBI's management contract, granted by the Finance Ministry
last year, was meant to be valid until September 1997.

Noorbasja Djunaid, who left within the first five minutes of
yesterday's negotiation, said: "We got nothing at all...GKBI will
looking for somewhere else to make money."

Several organizations, including the economic section of the
ruling Golkar party and the Indonesian Chamber of Commerce and
Industry, as well as several business analysts and legislators,
have argued that GKBI should be allowed to hold some controlling
shares in Kanindotex, which owns three mills in Central Java in
which more than 10,000 workers are employed.

Intervention

Yesterday's meeting also finally ruled out any possible
intervention by BBD and Bapindo, since the banks failed to secure
any controlling shares.

Benny Sutrisno, a member of the consortium who is now the
president of Kanindotex, confirmed that yesterday's agreement
also dropped a government suggestion that might have facilitated
a management takeover by BBD and Bapindo.

"This concluding agreement also cancels a point contained in
the previous memorandum of understanding which stated that,
should the consortium fail to honor Kanindotex's debts in the
first nine months, the creditor banks could take over the
management of the textile group," he said.

Benny said that the dropped point was originally proposed by
Minister of Finance Mar'ie Muhammad.

The takeover agreement of Kanindotex was originally planned to
be concluded on March 31 but was delayed at the last minute,
reportedly because of Mar'ie's insistence that the consortium
reserve about 20 percent of Kanindotex's shares for BBD and
Bapindo and a further 20 percent for GKBI.

Mar'ie was not available for comment last night.

Repayment

Yesterday's meeting determined that the consortium would
provide Rp 539 billion, of which Rp 369 billion would be used to
repay Kanindotex's investment loans to BBD and Bapindo within a
nine month period.

The remaining Rp 170 billion is to be used for equity
investments and to increase the textile group's working capital.

The rest of Kanindotex's debts are to be paid within eight
years with an annual interest rate of 11 percent, a level well
below the prevailing market rates of about 20 percent.

The 11 percent annual rate represents a compromise between the
consortium and the creditors, since Bambang had previously asked
for a two percent rate for the first four years and a four
percent rate for the remaining period.

"Actually the 11 percent annual interest rate is still
burdensome to us," Benny said, adding that the banks had
originally proposed for a 15 percent annual rate.

Kanindotex was previously owned by businessman Robby Tjahjadi,
who served time for smuggling luxury cars in the late 1970s.

The Kanindotex issue became the subject of political debate
after a parliamentary investigation lead by a Golkar legislator
last year exposed Robby's failures to honor the textile group's
debts.

The Golkar legislator, Bambang Warih Koesoemo, who also
claimed that Robby had marked up Kanindotex's real worth to
secure a bigger loan, was eventually dismissed by his party
earlier this year for purportedly deviating from the official
line.

Robby Tjahjadi himself has never faced formal charges up to
now. He is thought to be living in Singapore.(hdj/32)