Marubeni denies deal to cut stake in Chandra Asri

Marubeni denies deal to cut stake in Chandra Asri

TOKYO (Dow Jones): Marubeni Corp., one of Japan's largest
trading companies, Tuesday denied a report it has reached an
agreement with the Indonesian government to restructure their
financially troubled ethylene venture, PT Chandra Asri.

A report in the Tuesday morning edition of the Nihon Keizai
Shimbun said Marubeni and the Indonesian government have agreed
to restructure the venture by reducing its capital by up to
US$700 million to sweep away a roughly US$650 million deficit
accumulated from unprofitable operations.

Chandra Asri is a venture formed between Marubeni, Showa Denko
KK and Toyo Engineering Corp. of Japan and several Indonesian
partners, including the Bimantara and Barito groups. The
Indonesian government took over the stakes of local investors
after the currency crisis exacerbated losses at the debt-ridden
project.

The Indonesian government, whose stake will reach some 70
percent after a debt-for-equity swap, also intends to sell a
large part of its stake in the venture to BP Amoco PLC (BPA) of
the U.K. after the capital reduction, for which the parties
involved entered final negotiations, the newspaper reported.

The capital reduction will cut Marubeni's stake to below 20
percent from the current 21.2 percent, the daily reported, and
leave Marubeni with a loss of about 20 billion yen, the newspaper
said.

"We have not reached a basic agreement on this matter," a
Marubeni spokesman said, denying the report. However, the trading
company is currently in discussions with the Indonesian
government to reorganize the venture, he added.

BP Amoco is "one candidate" for investing in Chandra Asri,
"but that is a matter that will come later," the spokesman said.
The spokesman declined to identify what losses Marubeni would
suffer in a revamping of the venture.

Chandra Asri operates a plant that produces 520,000 metric
tons of ethylene a year. The roughly US$1.9 billion venture is
one of the largest Indonesian projects backed with Japanese
investment.

It has been under the supervision of the Indonesian Bank
Restructuring Agency after defaulting on debts to several private
and state banks. Chandra Asri's Japanese creditor banks last year
agreed to restructure its debts, suspending repayment of US$180
million of loans until August 2001.

BP Amoco

Meanwhile, BP Amoco PLC of the U.K. said in Jakarta on
Tuesday it was seeking to buy a significant stake in financially
troubled Indonesian ethylene venture, PT Chandra Asri, from IBRA,
after the company's debt is restructured.

Rob Kelly, business development manager at BP Amoco Chemicals
Indonesia, said the British company will seek to merge Chandra
Asri with its local polyethylene plant PT Petrokimia Nusantara
Interindo, known as PT PENI.

Kelly said, however, that he couldn't confirm whether IBRA has
reached an agreement with Marubeni Corp., one of Japan's largest
trading companies, to restructure Chandra Asri's debt.

"We're in negotiations (with IBRA) to merge PT PENI and
Chandra Asri and are looking to come out of that with 50 percent
of the merged company," Kelly said. "No progress is possible on
this though, until the Chandra Asri restructuring is complete."

Located in Cilegon in West Java, Chandra Asri produces
ethylene, polyethylene and propylene, the base materials for
plastics.

According to Kelly, the Indonesian government would seek to
hold onto some of Chandra Asri after a sale to a foreign
investor.

A sale of a substantial equity stake in Chandra Asri would
mark a major breakthrough for IBRA as it struggles to sell assets
to generate funds for the state budget.