Kanindo finally acquired

Kanindo finally acquired

It was widely predicted that the business consortium led by Bambang Trihatmodjo, chairman of the widely-diversified Bimantara conglomerate, would end up as the new owner of the debt-ridden Kanindo textile group. That prediction had prevailed since early this year despite the strong lobbying by the finance minister, the Indonesian Chamber of Commerce and Industry and even the economics department of the ruling Golkar political group to have the textile group temporarily under the management and control of the Batik Cooperatives Association (GKBI) take it over.

In spite of all of the official pronouncements about the high priority of the development of cooperatives as one of the backbones of the nation's economy, the contest for the takeover of the Central Java-based textile group took an unusual path as soon as the politically well connected consortium entered the picture.

There were, we think, at least two important factors that determined the success of the bid from Bambang's consortium.

First, as soon as the consortium entered the game and its members were disclosed, no other interested investors dared to submit bids. That was not because other businessmen were prohibited from submitting competitive bids. Nor was it due to a total lack of commercial viability on the part of the Kanindo group. The group turned out to be highly profitable under the management of GKBI, which managed the company from last September under a contract with the creditors. It was more a result of the way the business community perceives the business scheme of things specific to Indonesia.

The question then is whether the deal concluded by the state banks with the new owners was fair, given the restrictions encountered with regard to the sole bidder. Anyway, given the stature of the consortium members, even the managements of the state banks had little leverage in the bargaining process.

The position of the two state banks -- Bank Bumi Daya and the Development Bank of Indonesia -- also seemed rather weak when Kanindo's bad loans were set against the backdrop of the questionable ways in which they had extended almost Rp 1 trillion (US$450 million) in credit to a single group controlled by a businessmen who had once been convicted of car smuggling.

The second factor, we reckon, is the blunt fact that only a few businessmen in the country are capable of raising a large enough amount of fresh funds for the acquisition. Bimantara is one of the few. Yet questions still remain as to how the consortium could have raised such a large sum of fresh funds because the companies owned by the consortium's members are all private concerns which are not subject to financial disclosures.

Even though many might question whether the terms of the debt rescheduling, including annual interest of only 11 percent, which is way below the market rates today, are fair to the state banks, the takeover deal has at least saved the banks from much bigger losses.

The Development Bank of Indonesia, for example, has not been able to collect the estimated $620 million in loans it extended outside of normal credit procedures to Eddy Tansil of the already bankrupt Golden Key group. This loan scandal led to the imprisonment of the bank's directors and Eddy himself.

Hopefully, what has been agreed by the Bambang-led consortium and the two state banks will be implemented fully. Even though the deal may not be the best for the state banks, it will release a large sum of lending resources back to the creditors. Thousands of small and medium-scale businesses can then benefit from the new funds available at the two state banks.