Sales of Salim Group assets seen to hit snag

Sales of Salim Group assets seen to hit snag

JAKARTA (Reuters): An Indonesian holding firm which controls
some 100 Salim Group companies said its 2001 plan to sell some of
the conglomerate's assets could not begin until a controversial
deal between big debtors and Jakarta was settled.

PT Holdiko Perkarsa Finance Director Scott Coffey said there
was "amazingly" strong international interest in buying Salim
companies because they had a reputation of being well run.

Control over the Salim assets was transferred to Holdiko in
September 1998 under an agreement aimed at covering Salim's huge
debts of Rp 53 trillion (US$5.5 billion) to the Indonesian Bank
Restructuring Agency (IBRA).

"Holdiko and the Indonesian Bank Restructuring Agency have
targeted another 15 to 20 assets for sale in the year 2001,
however before we launch those assets, we need verification from
IBRA and the government with regard to the structure of the
agreement," Coffey told Reuters.

The government is still debating whether additional assets
pledged by Salim and other top debtors late last year under the
deal was enough to cover outstanding debts.

Coffey said the planned 2001 sales should net Rp 7-8 trillion
for IBRA, up to 30 percent of its revenue target for the year.

The once dominant Salim conglomerate, which had close links to
disgraced former President Soeharto, is IBRA's largest debtor and
revenue from its asset sales are critical for meeting budgetary
targets.

Key assets included for sale in the 2001 program are:
-- Carmaker PT Indomobil Sukses Internasional;
-- Flour factories Berdikari Sari Utama Flour Mill and Sriboga
Raturaya;
-- Four sugar concerns including Indonesia's largest ethanol
manufacturer PT Indolampung Distillery;
-- Real estate interests including the Riau Property Project and
Metropolitan Kencana which includes the World Trade Centre and
the Pondok Indah Mall, both in Jakarta.

A number of other key asset sales that were delayed in 2000,
including television station PT Indosiar, retailer PT Indomarco
Prismatama and coal miner PT Indocoal, have been rolled into the
2001 program.

"For the first and second quarter of this year, Holdiko will
continue to sell assets which were targeted in the year 2000...,"
Coffey said in rare public comments for Holdiko.

"If we sell not only the assets that are held over from last
year but the assets targeted for 2001, in total we expect to be
able to raise 7-8 trillion for the budget and for IBRA in 2001."
Coffey said investor interest was strong.

"We have people lining up to buy these assets," he said.
"Investor interest is amazingly, very, very strong for companies
in which they can have management control, meaning they have more
control in how finances are spent. The Salim Group is known for
having good managers across all of their companies."

Under the debtors' agreement -- called the Master Settlement
and Acquisition Agreement or MSAA -- owners of failed banks were
forced to surrender assets to cover huge debts to the state, run
up during the country's economic crisis of the late 1990s.

Anthony Salim, former owner of Indonesia's largest retail
bank, Bank Central Asia (BCA), pledged assets worth Rp 53
trillion to cover debts run up by the bank.

Jakarta has demanded more assets because the value of those
pledged has eroded, lumbering the state with the difference.

More have been pledged but the government is unsure whether
these cover the debts under the MSAA, which was made during the
rule of former President B.J. Habibie.

Salim asset sales raised Rp 8.7 trillion last year, helping
IBRA raise Rp 20.71 trillion in revenue for the truncated April-
December budget, beating an Rp 18.9 trillion target. The 2001
target is Rp 27 trillion.

A large portion of Salim assets were sold quickly at the end
of 2000, raising concerns some of the deals might not be legally
closed. But Coffey said any outstanding matters were technical,
adding all the deals would be wound up within the next month.

"For all of the sales announced closed before Christmas, we
had binding sale and purchase agreements and the funds for the
purchase of these companies were transferred into escrow accounts
under the management and control of Holdiko Perkasa," he said.

"The probability any of our deals don't go through is zero."

Of most concern was a Rp 3.6 trillion deal for 25 Salim oil
palm plantations sold to Malaysia's Kumpulan Guthrie Bhd
[KGBK.KL], which IBRA has said would be closed next week.

Finalization of the sale -- IBRA's second biggest -- had been
cast into doubt because of forestry rules which limit land use.