No personal guarantee from Eka Tjipta, son says

JAKARTA (JP): The owner of heavily indebted Sinar Mas Group said its founding father, Eka Tjipta Widjaya, would not surrender his personal guarantee for debts guaranteed by the Indonesian Bank Restructuring Agency (IBRA).

Indra Widjaya, a member of the Widjaya family, which owns Sinar Mas, said his father Eka should not be held liable for the debts, as he was no longer a shareholder of the group.

"Pak Eka has stayed out of the business, he is not a shareholder anymore," Indra told reporters who met him at IBRA's office.

Sinar Mas owes its subsidiary, Bank Internasional Indonesia (BII) US$1.059 billion plus Rp 1.8 trillion (about $191.28 million).

IBRA then issued a blanket guarantee over its debts to prevent a rush against BII for fear that Sinar Mas may default on its debt.

In return, the agency required Sinar Mas to transfer its assets worth at least 145 percent of the group's debts to BII.

But legislators also demanded that the Widjaya family pledge their personal assets, including those of Eka.

Legislators argued IBRA would be wasting public money to guarantee debts that were at high risk of defaulting.

Around 90 percent of Sinar Mas' debts to BII belong to the group's Singapore-based Asia Pulp & Paper (APP).

Earlier, APP announced a standstill over payments for debts worth $13 billion, the biggest yet in Asian corporate history.

Panicking creditors are racing to control APP and Sinar Mas' assets to protect themselves against a default.

APP responded by asking for more loans, saying it needed to stabilize its operations in order to raise its repayment capability.

Meanwhile, the copy of an agreement for the asset transfer between IBRA and Sinar Mas does not include Eka as one of Widjaya's personal guarantors.

The document, dated Jan. 26, only stated Muktar Widjaya, Teguh Ganda Widjaya, Franky Oesman Widjaya and Indra Widjaya as personal guarantors.

Indra said Sinar Mas had already handed over assets to IBRA.

He also denied the group had double pledged its assets to magnify their value before IBRA.

"How can we double pledge our assets, if IBRA has our land certificates," he said.

Indra also denied rumors that Sinar Mas had transferred some $250 million to China for debt repayments.

In Indonesia, APP's 17 manufacturing facilities are also spread across China and India.

Local media reported that the information of the money transfer was based on the results of a due diligence on BII.

The due diligence process followed plans to merge BII with state-owned Bank Mandiri.

The government initiated the merger to prevent BII from collapsing given the high concern of a Sinar Mas debt default.

Under the plan, IBRA would take over Sinar Mas' debts from BII's balance sheet and replace them with recycled bonds.

That move would annul IBRA's guarantee agreement with BII, as the agency would become the creditor to Sinar Mas.(bkm)