Finger-pointing begins over Kanindotex takeover

Finger-pointing begins over Kanindotex takeover

JAKARTA (JP): Officials and executives started pointing fingers yesterday in relation to a controversial takeover of a troubled textile group, Kanindotex, by a politically well- connected consortium.

"I'm disappointed and appalled... The ministry of cooperatives and the ministry of finance did not give the Indonesian Batik Cooperatives Federation (GKBI) a chance to run Kanindotex," Sri Edi Swasono, chairman of the Indonesian Cooperatives Council and a senior staff-member of the National Development Planning Board, told reporters after meeting with President Soeharto at the Merdeka Palace here yesterday.

Sri Edi said he did not, however, discuss the Kanindotex issue with the President.

Despite a four-year contract granted last year by the finance ministry, the GKBI was completely ejected from the management of the Kanindotex textile group on Tuesday.

GKBI won the contract last year after Kanindotex, which owns three mills in Central Java employing more than 10,000 workers, defaulted on loans totaling Rp 1.3 trillion (US$585 million) from two state-owned banks, Bank Bumi Daya (BBD) and Bank Pembangunan Indonesia (Bapindo).

Executives of GKBI said recently that the federation had increased the group's net sales to Rp 115 billion (US$51.6 million) per month and achieved a profit of Rp 24.5 billion during the first three months of this year, although some additional debts were incurred in the early days of the rescue program.

The two banks said on Tuesday that GKBI, which had expressed a wish to buy some shares in Kanindotex and to retain its management, had voluntarily withdrawn from the takeover process on May 5.

After months of delay, reportedly due to an objection from the finance ministry, Kanindotex is now 90 percent owned and fully run by PT Apac Century Corporation, a consortium headed by Bambang Trihatmodjo, President Soeharto's second son, who chairs the Bimantara conglomerate.

Bambang's consortium acquired Kanindotex's listed subsidiary PT Mayatexdian earlier this year through a direct-placement transaction at a price estimated to range between $26 million and $32.52 million.

Since neither BBD nor Bapindo won a controlling stake in Kanindotex, the government will not be able to closely supervise financial developments in the troubled group.

The consortium secured a remarkably low 11 percent annual interest rate from Kanindotex's creditors, compared with a market rate of about 20 percent per annum, under which it is to repay the bulk of the textile group's debts within eight years.

Overrated

In the meantime, Minister of Cooperatives and Small Enterprises Subiakto Tjakrawerdaya was quoted by Antara on Thursday as saying that GKBI's management and financial prowess had been overrated by the public.

"That cooperatives federation is not yet perfect, so it cannot restructure Kanindotex's debts... This is also realized by GKBI's management," Subiakto said during a meeting of the Association of Young Businessmen in Jakarta.

The minister denied failing in his duty to promote the development of cooperatives in connection with the takeover issue.

GKBI's president, Noorbasha Djunaid, was not available for comment yesterday.

Minister of Finance Mar'ie Muhammad has yet to comment on the latest chapter in the Kanindotex saga.

Financial loss

In the meantime, banking and business analyst Laksmana Sukardi warned yesterday that GKBI's "defeat" in the Kanindotex takeover could translate into a long term financial loss for the government, which owns the two creditor banks.

"The government should let GKBI, which has a good management record, manage Kanindotex and allow the creditors to inject equity into the troubled project," he told The Jakarta Post by phone.

In so doing, all of the debts owed by Kanindotex could be "translated" into equity, which could eventually be sold to the public in an offering, he said.

"That strategy could generate capital gains for the government," Laksmana said.

"But what we have now is that the banks must subsidize Apac Century by extending loans with an annual interest rate of 11 percent... The banks will suffer high funding costs since those Kanindotex debts were originally given out at a much higher rate," said the analyst, who is a former banker.

"On top of it, the capital gain opportunity has been reaped by Apac Century, which already controls Mayatexdian, Kanindotex's listed affiliate," Laksamana said.

He said he was convinced that Apac Century would soon merge with Mayatexdian through a back-door listing.

"Of course they will do it, it is the most logical move," he said.

No Apac Century executives were available for comment yesterday.

Laksmana blasted Subiakto's statement which, the analyst said, "belittled the cooperatives movement."

"How can he say such a thing? I thought it was his job to develop cooperatives. Doesn't our constitution say that cooperatives are the backbone of our economy?" (hdj)