IBRA agrees to share SMG assets with foreign creditors
Dadan Wijaksana, The Jakarta Post, Jakarta
The Indonesian Bank Restructuring Agency (IBRA) reached an agreement on Friday that would allow the indebted Sinar Mas Group (SMG) to repay around US$950 million worth of its remaining debts to the agency over a four to 10-year period.
IBRA deputy chairman for the Asset Management Credit (AMC) division Mohammad Syahrial said the agency also agreed to share out the asset collateral handed over by the troubled group with the latter's other creditors.
"We understand that there has to be a sharing (of SMG collateral) with other creditors," Syahrial was quoted as saying by detik.com.
He did not provide details as to what percentage of the assets pledged as collateral would be shared with SMG creditors, who are mostly foreigners.
The restructuring facility came less than a week after the group made a $90 million payment in cash to avoid its collateral being confiscated by the agency.
The latest payment, coupled with some $45 million worth of shares and non-performing loans in the group's subsidiary Bank Internasional Indonesia (BII), has reduced the group's total debts to the agency from $1.2 billion to $950 million.
Syahrial said that a memorandum of understanding (MoU) was signed by IBRA chairman Syafruddin Temmenggung and representatives of SMG's foreign creditors following a series of negotiations.
Sinar Mas, the country's second largest business empire prior to the 1997 financial crisis, borrowed massively from BII at the time to help finance its aggressive expansion program.
To prevent the debts from going bad, the government last year took over the group' debts to BII, which also owes billions of dollars to international creditors and bondholders.
In return, the group agreed to surrender assets equal to 145 percent of its debts to BII as collateral until the group repaid the debts.
Around 90 percent of these debts came from to the group's Singapore-based Asia Pulp & Paper Co. (APP), which has defaulted on more than $12 billion of debts to foreign creditors.
It was these foreign creditors who had asked IBRA to share the group's lucrative collateral for fear that the group would lose its source of funds to settle its debts to them.
Among the assets pledged were factories and equipment owned and operated by PT Indah Kiat Pulp & Paper, PT Tjiwi Kimia, PT Pindo Deli Pulp & Paper Mills, PT Lontar Papyrus Pulp & Paper Industry, and PT Purinusa Eka Persada.
Sinar Mas was also reported to have offered shares in publicly listed Indah Kiat, Tjiwi Kimia, PT Duta Pertiwi and PT Smart Corporation, and in non-listed PT Indomilk, Pindo Deli Pulp, PT Bumi Serpong Damai and PT Henkel Indonesia.