Sinar Mas says it won't inject cash in Amcol

JAKARTA (JP): Sinar Mas chairman Eka Tjipta Widjaja said yesterday his group would not inject cash into the troubled Singapore-based Amcol Holdings.

He said his local companies would takeover the majority of Amcol through a share swap arrangement.

"The deal will not involve cash but an injection of the group's assets in the Singapore firm under a share swap," he said after the opening of Eka Life's new headquarters.

He refused to say which companies would be integrated into Amcol.

Amcol was put under judicial management in July after a Price Waterhouse audit revealed it had serious cash flow and debt problems.

According to earlier reports, Sinar Mas agreed to rescue Amcol and was expected to inject assets worth around US$2 billion into the company, which would be renamed Golden Amcol.

Sinar Mas managing director Indra Widjaja, one of Eka's sons, said his company's palm oil and property divisions and its noodle factory in China would be transferred to Amcol.

Indra, the president of the group's banking arm, Bank International Indonesia, said Sinar Mas aimed to use Amcol to spearhead its regional expansion in food, palm oil and property.

Eka confirmed the Amcol takeover would give Sinar Mas better access to world markets.

"It is a matter of establishing a trading house for the group's Indonesian companies. We don't have a plan to relocate Sinar Mas' core activities to Singapore," Eka said.

The takeover would help Sinar Mas acquire loans from international banks, he said, adding that companies in Singapore often had better credit access.

"I am not saying that Indonesian companies are not trusted by international financial institutions," he said. "Many Indonesian companies have raised loans overseas but their lending rates are higher than those charged for Singaporean companies," he said.

The Sinar Mas chairman denied yesterday an allegation that his group's massive investment in China was capital flight.

"It is only a matter of a business expansion," he said, adding that the planned investments in China, which would equal around 20 percent of the group's total investments in Indonesia, would be financed through the group's Singapore unit.

According to reports, Sinar Mas planned to invest between US$3 billion and $5 billion to build pulp and paper plants in China in the next three to five years.

The Sinar Mas is now the largest pulp and paper manufacturer in China. Its plant in Ningbo can produce up to 600,000 tons yearly.

Eka said his company was building a plant in Zhenjiang with an expected annual capacity of about 1.5 million tons, and that it planned to build a plant in Hainan.

Indra said Sinar Mas owned at least 50 percent of each plant, adding that its total investment would not exceed $3 billion.

"I do not see it (the expansion in China) as capital flight, because there was not much cash involved," Eka said.

The massive investments are expected to be funded through Sinar Mas' Singapore-based subsidiary, Asia Pulp and Paper Company, which is planning to issue bonds to finance the projects. (04)