Indorayon's foreign shareholders to sue govt

Indorayon's foreign shareholders to sue govt

JAKARTA (JP): Foreign shareholders of publicly listed pulp and
rayon firm PT Inti Indorayon have decided to file suit against
the Indonesian government over the mid-1998 suspension of the
factory's operations in Porsea, North Sumatra.

The trustee of Indorayon foreign shareholders, lawyer Todung
Mulya Lubis, said on Friday the foreign investors had lost their
patience because the government had not demonstrated serious
efforts to solve the dispute that forced the plant to stop
operating in June 1998.

"The foreign shareholders are going to file suit against the
Indonesian government at the International Center for Settlement
of Foreign Investment Dispute in Washington DC," he told a news
conference.

"They will charge the Indonesian government for unlawful
closure. The legal documents will be ready in two weeks," he
said.

Todung said the foreign shareholders, who together own 86
percent of Indorayon, however, would still give the government
time to act on its recent plan to assign an independent auditor
to investigate the company before proceeding with the lawsuit.

"If the team set up by the government to manage the new audit
does not come up with clear terms of reference and a timetable
for the audit, foreign shareholders will immediately file a
lawsuit. It could possibly be done at the end of April," Lubis
added.

President Abdurrahman Wahid said on Thursday a new audit would
immediately be done on Indorayon by a special team established by
the government without having to reopen the company's factory.

However, Indorayon's chief commissioner Palgunadi Setyawan
said it would be impossible to obtain accurate data to prove the
allegations that the factory's operations damage the environment
and cause public health hazards.

"It would need about six months to prepare everything from log
supply to machine adjustment to make the factory operate at the
normal capacity and be ready for auditing," he said.

The two-decade presence of Indorayon's pulp and fiber factory
in North Sumatra, which has a capacity to produce 240,000 metric
tons of pulp in addition to 60,000 tons of rayon fiber a year,
has led to mounting criticism and pressure from local people and
many non-governmental organizations.

State Minister of Environment Sonny Keraf recently recommended
to the Cabinet that the plant be closed down or relocated to
another area.

But the government did not respond to the recommendation after
most other ministers instead proposed a new audit of Indorayon
before any decision was made.

Last year then president Habibie ordered an independent audit
but the instruction was never implemented.

According to Indorayon's finance director David Pile, major
creditors, such as financial institutions and banks, were the
parties that had the biggest interest in the lawsuit plan.

Pile said that under a debt restructuring program reached last
year, Indorayon agreed to swap debt for equity with foreign banks
and bondholders.

He said the restructuring program was actually based on the
assumption that the factory would be reopened in the first half
of this year.

Pile said the first coupon payment that falls due in December
2000, however, could be rolled over until the following year
since the company had built flexibility into its debt
restructuring plan.

He said Indorayon's inability to operate during the last 20
months had resulted in a sharp drop in its market capitalization
value from about $1.4 billion in 1996 to only around $40 million
at present.

Inti Indorayon is listed on the Jakarta Stock Exchange and is
also traded in the United States through American depository
receipts. (cst)