Kiani settlement may take time: Bank Mandiri

Rendi A. Witular, The Jakarta Post, Jakarta

Bank Mandiri will have to wait some time to recover money owed by troubled pulp producer PT Kiani Kertas, as ongoing negotiations between the company and new investors interested in taking over the company are expected to be lengthy.

Bank Mandiri president director Agus Martowardjojo said a deal between the current owner of Kiani and new investors was unlikely to be realized any time soon.

"We expect the debt settlement with Kiani to take some time. Recent reports on plans by certain investors to buy out Kiani will not indicate an immediate settlement to the problem," said Agus at a press conference on Wednesday.

Kiani, which is controlled by Prabowo Subianto, former son-in- law of ex-president Soeharto, owes some US$201 million in lending principal and $12 million in interest to Bank Mandiri.

Prabowo, a commander of the Army's Special Forces (Kopassus) during the twilight days of the Soeharto era, paid some Rp 7.1 trillion (US$724 million) to the now-defunct Indonesian Bank Restructuring Agency (IBRA), which controlled Kiani, in 2002 for a controlling stake in the company.

The company formally belonged to Mohammad "Bob" Hasan -- a close ally of Soeharto -- and was surrendered to IBRA after the timber tycoon defaulted on massive debts with a number of banks following the Asian financial crisis of the late 1990s.

Aside from purchasing the stake, Prabowo also teamed up with Bank Mandiri to take over part of Kiani's debts totaling about $201 million.

However, Kiani remained unable to operate at full capacity after the takeover, due mainly to a lack of working capital, leaving it incapable of paying its debts to the bank and overseas creditors.

Kiani will need fresh capital from new investors just to revive its business so that it can pay its debts to Mandiri no later than 2007, as was agreed to in a restructuring agreement with the bank signed late last year.

Earlier in the day, Bloomberg reported that the Sampoerna family may spend $370 million to buy Kiani.

According to the newswire agency, which quoted PT Danareksa president director Lin Che Wei, Putera Sampoerna, the head of the family, has accepted an offer to acquire ownership of Kiani Kertas for $200 million cash plus settling the $170 million debt at Bank Mandiri.

"We made an unsolicited offer to all three parties -- Sampoerna, Mandiri and Prabowo," said Lin after meeting Mandiri officials and Sampoerna late on Tuesday.

Agus, however, refused to confirm the report, saying only that the bank would support the takeover should the new investors offer a good price and paid all of the debts without any discounts.

"If the investors offer too low a price, we will have to ask Kiani to seek other investors. We don't want Kiani to hastily wrap up a deal at too low a price and then be unable to settle its debts," he said, adding that the bank had met three investors interested in Kiani.

United Fiber System Ltd., a Singapore-based forestry company, voiced interest in August and appointed Deutsche Bank AG as an advisor.

However, there has been no reported progress of negotiations.

Elsewhere, shareholders of Bank Mandiri accepted the resignation of the bank's director for compliance, Nimrod Sitorus, during an extraordinary shareholders meeting on Wednesday.