Prabowo may let go of Kiani
Prabowo may let go of Kiani
Rendi A. Witular, The Jakarta Post, Berau, East Kalimantan
Prabowo Subianto, the former son-in-law of ex-president Soeharto,
is ready to sell his controlling stake in troubled pulp producer
PT Kiani Kertas if there are no investors willing to inject badly
needed fresh capital into the company.
Kiani vice president director Widjono Hardjanto said the major
shareholder had agreed to relinquish shares within three months
in order to prevent the firm from going bankrupt due to a lack of
working capital amid massive debts.
"Pak Prabowo has said that he will sell the company to new
investors if there are no fresh funds to help Kiani get back into
full operation and avoid closure," said Widjono to reporters
during a media visit to the company's plant over the weekend.
At present, Kiani is 99.99 percent owned by Fayola Investment
Limited, a company controlled by Prabowo under his flagship PT
Nusantara Energy.
Prabowo, who was a former commander of the Army's special
forces, Kopassus, during the twilight days of the Soeharto era,
paid some Rp 7.1 trillion (about US$750 million) to the now-
defunct Indonesian Bank Restructuring Agency (IBRA) in 2003 for a
controlling stake in the company.
The company formally belonged to Mohammad "Bob" Hasan -- a
close ally of Soeharto -- and was surrendered to the IBRA after
the timber tycoon defaulted on massive debts to a number of banks
following the Asian financial crisis of the late 1990s.
Aside from purchasing the stake, Prabowo also teamed up with
state-owned Bank Mandiri to take over part of Kiani's debts worth
about $201 million.
However, Kiani remained unable 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 other overseas
creditors.
Widjono said Kiani shareholders were currently negotiating
with ten overseas investors who were interested in taking over
the company. However, the company's massive debts were proving to
be a major obstacle.
"Some investors are willing to inject working capital to
enable it to operate at full capacity, and some want a
controlling stake. But the debt problem has become a stumbling
block," he said.
Kiani will need some $50 million just to revive the 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 that was
signed late last year.
Kiani's bad loans have contributed to Mandiri's high gross
non-performing loans (NPL) ratio of 7.2 percent as of September
last year, as compared to the central bank's 5 percent limit.
Kiani managing director, Stefan Looho, meanwhile, said the
working capital was needed to help boost the company's profit by
increasing its production output to its existing installed
capacity of 500,000 tons per year.
"At present, it can only produce 300.000 tons of pulp per year
due to the lack of funds to buy raw material under a long-term
contractual schemes in order to ensure continuity of supply,"
said Stefan.
The company could reap at least $100 million in operational
profits per year if it could gear up to full capacity, with a
pulp price set at $460 per ton.
With current rates of production, the company will only post
some $30 million in profits.