IBRA to be asked to review APP's asset pledge

JAKARTA (JP): The Capital Market Supervisory Agency (Bapepam) said on Tuesday it might ask the Indonesian Bank Restructuring Agency (IBRA) to review assets it has received as collateral from the Singapore-based Asia Pulp & Paper (APP).

Bapepam chairman Herwidayatmo said he suspected APP had pledged assets of its publicly listed units, without the knowledge of the investing public.

"If that's the case, we may ask IBRA to review it (the asset pledge)," Herwidayatmo told reporters on the sidelines of a hearing with the House of Representatives' Commission IX for financial and development planning affairs.

He said his office had been investigating the assets that were pledged to IBRA.

APP, which is part of the country's leading conglomerate Sinar Mas Group, announced earlier this month that it had pledged IBRA assets worth some US$1.3 billion.

The assets are to guarantee APP's loans of Rp 12 trillion (about US$1.05 billion) from the affiliated Bank Internasional Indonesia (BII).

IBRA demanded Sinar Mas pledge assets worth at least 145 percent of its total debt, in exchange for the agency's agreement to guarantee its debt to BII if Sinar Mas defaulted.

The agency has said it must guarantee Sinar Mas' debt to BII to help secure the government's Rp 6.5 trillion recapitalization bonds it injected into the bank.

Sinar Mas must pay the debts to BII in seven instalments, with the last payment of 65 percent of its total debt to be settled by Sept. 2003.

APP's collateral to IBRA includes the publicly listed PT Indah Kiat Pulp & Paper, and PT Pabrik Kertas Tjiwi Kimia.

In its announcement, the company said it had "granted liens on all of their (APP's units pledged to IBRA) fixed assets, among them land, building and machinery."

But according to Herwidayatmo, APP can only pledge the shares that Sinar Mas owns in these companies.

"One must ask the independent shareholders for permission, whether they're willing to have their stakes pledged as collateral to the government," he explained.

The investing public owns a 36.5 percent and 32.6 percent stake in Tjiwi Kimia and Indah Kiat respectively.

Herwidayatmo said his office still awaited a formal explanation from Tjiwi Kimia and Indah Kiat concerning the asset pledge. Bapepam cannot ask for explanations from APP because the latter is not listed here but in New York.

Until both companies give their explanations, he said, Bapepam will neither sanction Indah Kiat and Tjiwi Kimia nor ask IBRA to review the asset pledge.

IBRA head of asset disposals Dasa Sutantio said IBRA would demand additional assets from Sinar Mas, if the ones pledged violated capital market regulations.

Herwidayatmo said earlier that APP had also pledged assets of its units that were already guaranteed to bond holders.

Indah Kiat, Tjiwi Kimia, PT Lontar Papyrus Pulp & Paper Industry, and PT Pindo Deli Pulp and Paper Mills had issued bonds without mentioning that they were subsidiaries of APP, he said.

Pindo Deli's annual shareholders meeting on Tuesday disapproved the company's asset transfer to IBRA.

APP's assets are sought after by creditors, after the company announced a standstill for debt payments of over $12 billion.

It said it needed time to improve operations, while working out a debt restructuring deal before resuming repayments of its debts.

APP's foreign creditors fear that the company's prime assets will fall into the Indonesian government hands, given its stronger position to pressure the Sinar Mas Group.

APP is the world's fourth largest paper producer by capacity, with current annual pulp capacity of 2.3 million metric tons, and paper and packaging capacity of 5.7 million tons.

It has 17 manufacturing facilities in Indonesia, China and India, with markets covering 65 countries. (bkm)