SMG told to repay debts to IBRA

The Jakarta Post, Jakarta

Troubled Sinar Mas Group (SMG) must repay US$240 million of its total $1.2 billion debt to the Indonesian Bank Restructuring Agency (IBRA) by the end of this month.

IBRA Chairman Syafruddin Temenggung was quoted by Antara as saying on Tuesday that failure to make the repayment would force the agency to seize the group's collateral assets, a move that would certainly anger Sinar Mas' foreign creditors and bondholders.

He added that the policy was in line with the decision made by the Financial Sector Policy Committee (FSPC) on May 8.

Sinar Mas had earlier asked the government for a rescheduling facility.

The government decided last year to guarantee Sinar Mas' debts in the ailing Bank Internasional Indonesia (BII) to spare the bank from deeper trouble due to a possible default by the group, which also owes billions of dollars to international creditors and bondholders.

In return, Sinar Mas agreed to surrender assets equal to 145 percent of its debts to BII as collateral until the group repay the debts.

Previous reports stated that the group had pledged various fixed and equity assets. Among the assets pledged were factories and equipment under PT Indah Kiat Pulp & Paper, PT Tjiwi Kimia, PT Pindo Deli Pulp & Paper Mills, PT Lontar Papyrus Pulp & Paper Industry, PT Purinusa Eka Persada.

It has also been reported that Sinar Mas offered shares in publicly listed Indah Kiat, Tjiwi Kimia, PT Duta Pertiwi PT Smart Corporation, in non-listed PT Indomilk, Pindo Deli Pulp, PT Bumi Serpong Damai, PT Henkel Indonesia.

Around 90 percent of Sinar Mas' debts to BII belong to the group's Singapore-based Asia Pulp & Paper Co., which has defaulted on more than $12 billion of foreign debts.

Sinar Mas, the country's second largest conglomerate after the Salim Group prior to the 1997 financial crisis, borrowed massively from BII at the time to help finance its aggressive expansion program.

BII was founded by Sinar Mas, but the bank is now under government control.