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management, had voluntarily withdrawn from the takeover process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)