PT Indorayon fails to make coupon payments

PT Indorayon fails to make coupon payments

JAKARTA (JP): Publicly listed pulp and rayon fiber maker PT
Inti Indorayon Utama announced on Tuesday that it would be unable
to meet coupon payments due this year.

The company said the temporary closure of its mill and the
adverse impact from the current economic crisis caused the
defaults.

"The temporary mill closure impacts on Indorayon's ability to
meet coupon payments for its 9.5 percent senior notes due 2000
and 7 percent euro convertible due 2006," the company said in a
statement.

Indorayon was due to make a coupon payment of US$3.4 million
on April 15, 1999, for its senior notes and $4.2 million on May
2, 1999, for its euro convertible.

Indorayon said it had appointed Donaldson, Lufkin & Jenrette
as its financial advisor and was crafting plans to implement a
debt-restructuring program.

The company said it planned to hold a meeting with its
creditors over the next few weeks.

Indorayon has some $360 million in overseas loans.

Indorayon said its operation continued to be affected by civil
disturbances combined with a lack of law and order enforcement at
Porsea, North Sumatra, where its primary production facility is
located.

Deliveries of raw materials to the Porsea mill came to a
standstill for nearly four months last year and had been
suspended since January this year, resulting in significant
losses in production and revenue, the company said.

"The situation was further confused by a statement issued in
late March in which the President announced Porsea mill
operations would be temporarily suspended, due to attacks on
Indorayon property and personnel and general rioting in the
surrounding area," the statement said.

President B.J. Habibie issued the temporary closure order
through North Sumatra Governor T. Rizal Nurdin, raising confusion
among Indorayon's management, who had not received any official
closure statement.

The President also ordered an independent team to audit the
impact of Indorayon's operation on the environment and people's
health.

Nongovernmental organizations and locals have accused
Indorayon of polluting the environment, including the scenic Toba
Lake.

"Indorayon is committed to protecting natural resources in its
care," the company said in defense.

A company representative said it was impossible for Indorayon
to damage the Lake Toba environment because the geographical
position of the Porsea pulp mill was lower than the position of
Lake Toba.

Analysts said Habibie's decision to temporarily suspend
operations at the mill was based on political considerations to
quell increasing local unrest.

Economists said closing down Indorayon would create more
difficulties for the company to meet its foreign debts, which is
detrimental to rebuilding foreign investor confidence.

Indorayon is a unit of the Raja Garuda Mas Group, a
diversified conglomerate controlled by businessman Sukanto
Tanoto.

Sukanto also controls the Singapore-registered Asia Pacific
Resources International Holdings Ltd., which decided in January
this year to divest its Indorayan holdings. (rei)