Sinar Mas signs pact to repay debt

Sinar Mas signs pact to repay debt

Dow Jones, Jakarta

The Indonesian Bank Restructuring Agency (IBRA) said the Sinar Mas Group signed Friday an agreement to repay US$310 million from the total $1.25 billion it owes the agency.

IBRA Chairman Syafruddin Temenggung said the Widjaya family, which controls Sinar Mas, has already paid $90 million in cash.

Under the agreement, Sinar Mas will also transfer to IBRA a 16 percent stake in Bank Internasional Indonesia (BII) valued at $45 million, Syafruddin told a news conference. IBRA is already the majority shareholder of BII, which it took over from the Widjaya family after the 1997 Asian financial crisis.

For the remaining $175 million, IBRA will restructure and sell loans owed by Sinar Mas to BII. The Widjaya family used BII to lend to itself during Asia's boom years.

If the amount from the loan sales doesn't cover the outstanding $175 million debt, IBRA will move ahead with selling stakes in companies the Widjaya family has pledged with the agency, including shares in food producer Indomilk, said Raymond Van Beekum, an IBRA spokesman.

IBRA is under intense pressure to raise Rp 42 trillion ($4.72 billion) this year to reduce a budget deficit bloated by the cost of bailing out banks since the crisis.

But Sinar Mas won't have to sell assets from its Asia Pulp & Paper Co. unit, which is currently in talks with hundreds of international creditors to restructure $13.4 billion in debt.

Foreign creditors are concerned that IBRA's efforts to get repayment from Sinar Mas might lead to the sale of APP assets before they complete debt restructuring talks.

IBRA hopes to restructure its remaining $940 million debt with Sinar Mas by joining with foreign creditors under the APP debt restructuring, Van Beekum said.

Earlier this week, Deutsche Bank AG and BNP Paribas filed a petition in Singapore's High Court to replace APP's management with an independent judicial manager during the restructuring to protect the company's assets.

Talks to restructure APP's debt have gone slowly due to the hundreds of creditors involved, and the lack of clear financial information on the company.

APP stopped payment on its debt in March 2000 amid falling global paper prices to allow it breathing space to continue making payments to suppliers.