IBRA has yet to obtain Eka's guarantee

IBRA has yet to obtain Eka's guarantee

JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA)
has so far failed to obtain the personal guarantee of business
tycoon Eka Tjipta Widjaja in return for the guarantee given by
the agency on loans made by Bank Internasional Indonesia (BII) to
Eka's business units.

IBRA official Tom Lembong said on Thursday that the Widjaja
family was still awaiting the debt restructuring result of Asia
Pulp & Paper (APP), and the development in BII.

"In the last dialogue with the Widjaja family, they said that
they still wanted to see the outcome for BII and APP," Tom said.

"In their view, the restructuring process of APP, and the
extent of their obligation to BII are still not clear. When it
has become concrete, then they will formulate the form of Eka's
personal guarantee," he added.

IBRA claimed last month that it was close to securing Eka's
personal guarantee.

IBRA, on behalf of the government earlier this year, issued to
BII a guarantee of the repayment of around US$1.2 billion in
loans made by BII to certain Sinar Mas companies, which are
mostly operating subsidiaries of Singapore-based APP, in a bid to
insulate BII from the potential negative impact of possible
default on those loans.

The Sinar Mas group and APP were founded by Eka, while BII was
the financial arm of the group. But the bank is now controlled
by IBRA after the government financed the majority cost of the
bank's recapitalization program. There is a possibility that IBRA
will merge BII with a stronger bank, as the former may not be
able to meet the year-end minimum 8 percent capital adequacy
ratio (CAR) requirement.

BII became vulnerable to developments at Sinar Mas after the
group was clearly unable to repay APP's debt of more than $12
billion to its foreign bondholders.

In return for the IBRA guarantee, Sinar Mas had already
pledged assets to the agency currently estimated to be equal to
around 145 percent of the BII loans to the group. Four of Eka's
sons have also given their personal guarantees. But the agency
insisted that Eka must also give his personal guarantee.

Tom said that the pledged assets were "clean and free,"
meaning that they had not been pledged to other creditors,
including APP's.

The assets which were pledged included land, buildings and
machinery of PT Indah Kiat Pulp & Paper, PT Pabrik Kertas Tjiwi
Kimia, PT Pindo Deli Pulp and Paper Mills, PT Lontar Papyrus Pulp
& Paper, PT Puri Nusa Ekapersada, and shares of certain Sinar Mas
companies, including those in the holding companies of PT
Wirakarya Sakti and PT Arara Abadi, forestry concession companies
that are timber suppliers to APP.

IBRA said that it had no immediate plan to liquidate the
pledged assets.

"IBRA remains committed to working with the other creditors
and Sinar Mas to seek a fair, transparent and expeditious debt
restructuring (of Sinar Mas) that maximizes debt recovery and
balances the interests of all creditors, APP and the people of
Indonesia," the state agency said in a statement.

"Consistent with these objectives, IBRA has no present
intention to immediately foreclose or liquidate the assets taken
as security," it added.

APP's bond holders had expressed concern that they would be
put in a disadvantageous position because assets and shares in
some APP units had been pledged to IBRA.(rei)