Govt, Marubeni to split Chandra Asri 80%:20%

Govt, Marubeni to split Chandra Asri 80%:20%

JAKARTA (Dow Jones): After long and tedious negotiations, the Indonesian government and Japan's Marubeni Corp. (J.MRB) have agreed in principle to split PT Chandra Asri Petrochemical Center's equity 80 percent: 20 percent, a government official said on Tuesday.

The split is part of the solution to restructure the company's debt totaling around US$1.05 billion.

Dipo Alam, a deputy of the coordinating minister for economy, finance and industry, said the government will own 80 percent of Chandra Asri and Marubeni the remaining 20 percent.

Dipo added that as the government and Marubeni have agreed to convert Chandra Asri's debt into equity, the three original shareholders of the company will no longer own any stake.

"I think they should accept the fact that their ownership (in Chandra Asri) will be zero," Dipo said.

The three local businessmen, Prayogo Pangestu, Hendri Pribadi and former President Soeharto's middle son Bambang Trihatmodjo were the original shareholders of the nation's largest olefin producer.

The Indonesian Bank Restructuring Agency ended up as the creditor of Chandra Asri after domestic banks transferred their non-performing loans, including the ones provided to Chandra Asri, to the bank agency.

Marubeni is the main guarantor of the $723 million of loan provided by Japanese financial institutions.

Earlier, the government proposed to split Chandra Asri's equity equally with Marubeni. The Japanese company, however, insisted to get only a minority stake although the loans it guarantees represent almost 69 percent of Chandra Asri's $1.05 billion debt.

By agreeing to obtain a higher stake in Chandra Asri, the government may have to pay the company's remaining debt to Japanese lenders.

"This thing is being discussed," Dipo said when asked whether the government will have to pay the remaining debt to Japanese lenders.

He added that Japan Bank For International Cooperation has pledged to help provide a loan to Chandra Asri to revamp its operation.

Chandra Asri plant is located in Cilegon, West Java and produces ethylene, polyethylene, and propylene -- the base materials for plastic.

The plant was built in the early 1990s and was given import tariff protection by Soeharto's government.