GKBI to manage Kanindo

GKBI to manage Kanindo

JAKARTA (JP): Minister of Finance Mar'ie Muhammad formally
appointed yesterday the Federation of Indonesian Batik
Cooperatives (GKBI) to take over the management of the debt-
ridden Kanindo business group for a three-year period.

The minister said that Noorbasha Djunaidi, the chairman of the
federation, will lead the new management team, which will be
assisted by a number of professionals from the federation.

The minister said in a statement that the appointment of the
new management was supported by the state-owned Bank Bumi Daya
(BBD) and Bank Pembangunan Indonesia (Bapindo), the company's
main lenders.

The new management team will take charge of all aspects of the
company's daily activities related to production, marketing and
personnel.

The new management team was assigned to improve the company's
liquidity to enable Kanindo to settle its unpaid debts of around
Rp 500 billion (US$238 million) in the two state-owned banks.

The minister said the new management should report its new
working agenda, budget proposals and progress to BBD and Bapindo.

Noorbasha announced later in the afternoon that initially, the
new management needs Rp 50 billion (US$23.8 million) in fresh
funds to finance the daily activities of the business group,
which operates three textile plants in Central Java.

The new management plans to conduct a field survey on the raw
material requirement as well as a financial restructuring plan,
Noorbasha said.

"We hope to be able to submit the financial restructuring plan
to BBD and Bapindo within the next 10 days," he said, adding that
GKBI will also seek bank loans to support the new management.

Reason

Assigning the federation to manage Kanindo was strictly a
business decision, he said, denying allegations that the
federation's assignment was made to protect the interests of
certain parties in the company.

"GKBI receives fees... It is a fee-based three-year management
contract," he said.

Noorbasha expressed optimism that GKBI, which groups 40
primary cooperatives set up by textile producers, will be able to
bring Kanindo back to normal within three years.

He said that the entry of either new investors or the company
itself into domestic stock exchanges will be decided after the
three years are up.

The announcement on the assignment of GKBI as provisional
caretaker of Kanindo was made following the withdrawals of
businessman Johannes Kotjo and his partners from the textile
company.

Kotjo, a former senior executive of the Salim Group, and his
partners agreed in July to inject Rp 850 million (US$400,000) per
day over a six-month period to rescue the ailing textile group,
but the deal was suspended last week after the finance minister
appointed BBD and Bapindo to caretaker its management.

Kanindo is owned by Robby Tjahyadi, a controversial
businessmen once jailed for smuggling luxury cars into the
country. The group was reported to have defaulted on loans of
around Rp 500 billion ($238 million) in Bapindo and BBD.

Robby, according to reliable sources, received credit
facilities totaling Rp 474 billion from BBD and Bapindo between
1990 and 1993 to build up its textile giant, now known as the
Kanindo Textile Group.

The loans, which carry interest rates of between 20 and 28
percent per annum, have partially turned sour, leaving Robby with
debt arrears totaling Rp 376 billion in March. The overdue is
estimated to rise to Rp 490 billion by the end of this year if no
fresh payment is made, the sources said.

The textile giant suffered a serious liquidity problem after
its raw materials suppliers required cash for all goods sold,
following the disclosure of the business group's debt problem in
February.

An executive of another textile company said that Kanindo's
liquidity problem worsened in the following months as Kanindo
sold most of its products below their production costs due to its
severe need for cash. (fhp/hen)