IBRA seeking additional assets from Sinar Mas

Dadan Wijaksana, The Jakarta Post, Jakarta

The Indonesian Bank Restructuring Agency (IBRA) is seeking additional assets from the Sinar Mas Group because the value of assets pledged last year is still less than the required amount.

IBRA chairman I Putu Gede Ary Suta said on Wednesday that the agency had recently completed the appraisal of the assets.

"There is a difference (in terms of value) between the disclosure of assets and the auditor's report appraisal.

"According to the regulations they have to surrender additional assets," Ary Suta told reporters on the sidelines of a hearing session with legislators.

However, he fell short of explaining how many additional assets Sinar Mas must surrender.

The government decided in January last year to guarantee Rp 13.7 trillion (US$1.3 billion) of Sinar Mas debts in Bank Internasional Indonesia (BII) in a bid to spare the ailing bank from deeper trouble due to a possible default by the ailing group, which also owes billions of dollars to international creditors and bondholders.

In return, Sinar Mas agreed to surrender assets equal to 145 percent of its debts to BII as collateral until the group repay the debts.

Sinar Mas is expected to repay its debts in installments with the last payment, amounting to 65 percent of the total debt, to be made in September next year.

BII, the former financial arm of Sinar Mas, is now majority owned by the government via IBRA following a government-sponsored recapitalization program.

Around 90 percent of Sinar Mas' debts to BII belong to the group's Singapore-based Asia Pulp & Paper Co., which has defaulted on more than $12 billion of foreign debt.

Sinar Mas, the country's second largest conglomerate after the Salim Group prior to the 1997 financial crisis, borrowed massively from BII at the time to help finance its aggressive expansion programs.

According to previous reports, Sinar Mas had pledged various fixed and equity assets, which, according to an initial appraisal, was worth around Rp 23.1 trillion.

Among the assets pledged are factories and equipment under PT Indah Kiat Pulp & Paper, PT Tjiwi Kimia, PT Pindo Deli Pulp & Paper Mills, PT Lontar Papyrus Pulp & Paper Industry, PT Purinusa Eka Persada.

Sinar Mas has also offered shares in publicly listed Indah Kiat, Tjiwi Kimia, PT Duta Pertiwi PT Smart Corporation, in non- listed PT Indomilk, Pindo Deli Pulp, PT Bumi Serpong Damai, PT Henkel Indonesia.

But Ary Suta said the agency had yet to receive the shares in Indah Kiat and Tjiwi Kimia.

"Those shares haven't been transferred yet," Ary Suta said.

The agency wants the group to hand over 27 percent of shares in Indah Kiat and some 42 percent of stakes in Tjiwi Kimia.

The plans to seek additional assets from Sinar Mas, however, may cause the jitters among the group's foreign creditors and bondholders.

There are concerns that Sinar Mas' assets might have plunged in value due to a combination of the economic crisis and falling pulp prices on the international market.

Ary Suta also said IBRA was hopeful that it could install a chief financial officer (CFO) in the group's operating companies soon, in a bid to strengthen control over the group.