Lewis & Peat insolvent on 'corporate abuse'
Lewis & Peat insolvent on 'corporate abuse'
SINGAPORE (Dow Jones): Singapore rubber trading company Lewis
& Peat (Singapore) Pte Ltd. is insolvent because of "corporate
structure abuse," a source close to the company told Dow Jones
Newswires Wednesday.
Lewis & Peat's owners broke a golden rule when "they used
short-term trade financing funds to fund long-term projects... in
which they had vested interests," he said, speaking on condition
of anonymity.
The projects are a rubber plantation in Liberia and a crumb
rubber factory in Hainan, China, said the source.
"The reason (for the insolvency) is a balance sheet issue, not
an income statement issue because the balance sheet was askew
when the loan became due and the owners were unable to secure
additional financing," he said.
Market speculation on Lewis & Peat's troubles had centered on
how the profitable parts of the group couldn't bail out those
that had incurred losses.
Global operations of Lewis & Peat group have been profitable
for the last three to four years up until the time the loan, made
by Lewis & Peat Distribution Pte. Ltd. in Singapore, was due Oct.
31, said the source.
He declined to reveal details of the loan.
Lewis & Peat's global operations include its branches in
London and Singapore, as well as Ennar Bakrie in Connecticut,
which is a partnership between Delaware-based Ennar Latex and
Lewis & Peat Inc., said the source.
Ennar Latex owns 51 percent of Ennar Bakrie, which borrowed
the money, he said.
Lewis & Peat is owned by Bakrie Sumatera Plantations, a
division of Indonesian conglomerate Bakrie & Brothers.
Lewis & Peat's Singapore operations, which also include Lewis
& Peat (Singapore) Pte. Ltd. and Lewis & Peat (Rubber) Holdings
Pte. Ltd., have a net worth of US$5 million, said the source.
As all the companies cross-guarantee each other, Lewis &
Peat's Singapore arm turned insolvent when the loan was due in
October as funds were sucked into the long-term projects, he
said.
"Lewis & Peat Singapore was fully able to pay all its debts
with money to spare, but it was unable to pay the group's debt,"
he said.
The Singapore arm of Lewis & Peat was placed under the
receivership of international business services firm Ernst &
Young Tuesday. Its U.K. arm went into receivership last week.
Lewis & Peat's U.S. dry rubber operations are still
profitable, said the source.
The Lewis & Peat group is independently financed by a
syndicate group of banks, he added.
As such, it wouldn't be affected by the debt-for-equity swap
that the Indonesian Bank Restructuring Agency helped to negotiate
for the ailing Bakrie group, he said.
In December, major creditors of the group agreed on a debt-
restructuring proposal that will enable them to recover half of
$1.2 billion in debt. Separately, IBRA has said it is owed Rp 4.3
trillion from the Bakrie Group. That figure is based on an
exchange rate of Rp 7,000 to the dollar.