Semen Cibinong's $250m write-off plan OK'd

JAKARTA (JP): Shareholders of publicly listed cement producer PT Semen Cibinong approved on Tuesday management plans to write off the company's controversial "missing" deposits worth over US$250 million, clearing the way for Swiss cement group Holcim Ltd. to become the company's majority shareholder.

Semen Cibinong shareholders also approved a $1.18 billion debt restructuring plan, under which Holcim agreed to purchase a controlling stake in Cibinong.

Semen Cibinong corporate secretary Jannus Hutapea said that following the shareholders' approval, the company could ink a deal for a debt restructuring deal by late August.

"The write off of the company's time deposits is part of its debt restructuring deal with Holcim, as they want to clear up the company's balance sheet," Jannus told reporters after Cibinong's annual and extraordinary shareholders meeting.

The $250 million in uncollectable deposits have been a major drawback to Cibinong's financial performance over the past three years when they first appeared as diminution of investment value in the company's balance sheet.

Last year, the company booked a heavy net loss of Rp 6.91 trillion (about $611 million) as against a net profit of Rp 25.84 billion a year before.

Semen Cibinong attributed the drop to the uncollectable deposits, worsened by foreign exchange losses of Rp 2.75 trillion, and financial charges of Rp 1.11 trillion.

Semen Cibinong, which accounts for more than 21 percent of the total national cement capacity of 46.23 million metric tons, recorded a 23 percent surge in local sales to 3.2 million tons from 2.6 million tons in 1999.

The controversy over the "missing" deposits surfaced in 1999, when it caused Cibinong to include a disclaimer in its financial report.

Semen Cibinong said it had placed time deposits worth $128.5 million with the Bank of the Central Pacific Limited in Vanuatu, and another $118.2 million at the Far East Bank Limited in the Cook Islands.

In 1999, the company sought to withdraw the deposits but was unable to do so, as the two banks faced liquidity constraints.

Speculation then rose that the $250 million went missing, after the company was unable to prove the existence of the time deposits.

Semen Cibinong refused to make public its time deposits certificates, reasoning that creditors, with whom it was in negotiation, might freeze the deposits.

The company once considered taking legal actions against the two banks, but its lawyer warned that its chances of winning a legal battle were slim.

The company then assigned two public accountants, Moores Rowland in Vanuatu, and BDO Spiders in New Zealand to seek financial information on the two banks. Both consultants failed.

In fact, Internet search engines are unable to retrieve basic information on the banks, other than their names.

Jannus said shareholders had mandated Semen Cibinong to negotiate the return of its time deposits with the two banks.

But he declined to say whether such an attempt would be workable, given Semen Cibinong's scant knowledge of the banks.

He pointed out that despite the write-off of the $250 million, Semen Cibinong retains the right to collect its time deposits.

Commenting on the debt restructuring deal, Jannus said it would expand Holcim's stake to 74.5 percent from the present 12.5 percent.

The acquisition is made up of three stages. In the first stage, Holcim will purchase Semen Cibinong's existing debts at a discounted rate from creditors, for which the company is to set aside $175 million.

After acquiring the debts, Holcim will convert them into equity to increase its stake in Semen Cibinong to 58.7 percent.

In the second stage, Semen Cibinong will convert the remainder of its debt principal into new long term debts worth $500 million. The rest will be converted into equity amounting to 26.4 percent of its shares; here Holcim's stake will rise by another 7.53 percentage points.

In the third stage, Holcim would purchase the remaining stake from Semen Cibinong's current single majority shareholder, PT Tirtamas Majutama, owned by business tycoon Hashim Djojohadikusumo.

Upon the completion of the debt restructuring deal, Tirtamas will have relinquished all its 43.31 percent stake in Semen Cibinong.

In addition, the deal will see the shares of the investing public diluted to 6.4 percent from the present 44.19 percent. (bkm)