Thu, 17 Jun 1999

Lippo Group restructures half of its $200m debt

JAKARTA (JP): The widely diversified Lippo Group announced on Wednesday the successful restructuring of about 50 percent of its US$200 million debt through converting debts to equity and swapping debts with assets.

Group deputy chairman James Riady said the group began restructuring its debts 20 months ago.

"We use debt-to-asset conversions, debt-to-asset swap and debt-buy-back option to restructure our debts," he said.

"Now about half of our total outstanding debt has been settled through asset swap and equity conversion and also a debt-buy-back option at a discount of between 50 percent to 70 percent."

He added that the group's outstanding debt was $200 million at the end of 1997.

James said the debt of its retail and information technology company Multipolar was reduced to Rp 300 billion (about $41 million) from Rp 800 billion about 20 months ago.

The debts of its publicly listed financial services arm Lippo Securities was reduced to Rp 80 billion from Rp 450 billion.

"We expect that Lippo Securities' debts will be zero in the next six months."

He added that he expected creditors would approve the group's plan to buy back its remaining $100 million debt at a discount up to 70 percent.

"We will sell our minority stake in its publicly listed insurance arm PT Asuransi Lippo Life to foreign investors," James added.

The minority stake sales would be done by divesting Lippo's 35 percent equity share in life insurance company PT Lippo Life Utama, a wholly owned subsidiary of PT Asuransi Lippo Life.

He declined to reveal the name of the prospective foreign investor, but said it was a well-known international insurance group.

"We have been involved in the process for about six months and we expect to hear more concrete things soon," he said.

Sources who asked for anonymity said the prospective investors included the American Insurance Group (AIG) and Germany's Allianz AG.

Lippo Group has 13 subsidiaries listed on the Jakarta Stock Exchange, including Lippo Securities, PT Asuransi Lippo Life, Lippo Bank, property firm Lippo Land, Lippo Karawaci, industrial estate Lippo Cikarang and retail firm Matahari Putra Prima.

Its hospital firm Siloam Gleneagles is listed on the Surabaya Stock Exchange.

James said the Lippo Group and its subsidiaries implemented several strategies to survive the country's prolonged economic recession.

"We are focusing on recapitalizing Lippo Bank, reducing debts and four core businesses, which are financial services, retailing, value-added urban development and strategic investment," he said.

The group also conducted massive corporate restructuring to improve its efficiency, reduce costs, maintain cashflow and enhance professionalism, he added.

"Our retail arm, Matahari, has downsized its stores and most of our companies have reduced expatriate staff (numbers) in order to cut costs," James added.

Meanwhile, Lippo's automotive concern publicly listed PT Lippo Enterprises said that it would operate its $40 million motorbike plant in the middle of next year.

Company president Rudy Nanggulangi said the company set up a joint venture with Taiwan's Kwang Yang Motor Company (Kymco), called PT Kymco Motor Lippo Indonesia, to operate the plant.

Kymco Motor is 40 percent owned by Lippo Enterprises and 60 percent by Kwang Yang.

"The plant is designed with an annual production capacity of 50,000 motorbikes with 100 cc and 125 cc engine capacity," he said on the sidelines of the Lippo Group's news conference.

Kymco Motor's motorbike will sell for Rp 11 million each, he added. (gis)