Telecom Asia: Singapore Telecom has done well buying assets around the region. Is that going to continue? Chua: Our focus has moved to execution and improving the return from existing business. You would have seen from the results we have announced for the last year that we have a sustained turnaround in Optus, our wholly-owned investment in Australia, and a number of other associates in the region have also done extremely well. We will be focusing on how we can improve the return from these investments we have made. I think where the opportunity presents itself what we would like to do is to increase our stakes in the associates we have now invested in. But we recognize that that's not something that we could achieve overnight.
Is that simply because in a number of your associates you are a minority shareholder? When we first made investments in a number of those countries, including Thailand, the Philippines, their foreign shareholding limits prevented us from acquiring a controlling stake in any of those companies ... We have in all cases negotiated significant governance rights, so although we are a significant minority shareholder, we do have governance rights which will ensure that our interests are protected. We think that increasing our stakes makes sense because these are businesses we know well and have been involved in. From a financial perspective, it means the risk is a lot lower and the outcome is a lot clearer to us.
Was it primarily because of Optus that your results improved this year? In the last 18 months we have been focusing not just on revenue growth but on cost control; a whole series of improvements they have made in marketing, financial control and other arrangements. I think the last year alone Optus had a five percentage point improvement in its operating margin.
Is the uncertainty over the planned sell-off of the government's stake a destabilizing factor for SingTel? Actually, nothing has really changed. I think the government has always said that they are prepared to sell down SingTel. What [Trade and Industry] Minister George Yeo had said in his fetter to the US Ambassador about selling down SingTel--to us it's really nothing new, because the government has said on many occasions that they are prepared to sell down their stake in Singtel. But as you can see in the letter and also in Temasek's subsequent press statements there's actually no time flame set for divestment. Another very practical issue: if you look at SingTel's market cap and you look at the size of Temasek's stake. This is not a divestment that Temasek can do overnight. But any increase in SingTel's free float would actually improve the liquidity of the stock in the market, which has been an issue with some investors. Although SingTel has the largest market cap I think the trading volume, because of the limited free float, could certainly be improved.
Singtel has changed in the last few years from being an overwhelmingly one-market operation to being focused on the region. To what extent does that make you a portfolio company? We are not a financial investor. We see ourselves as a strategic telco investor. If there is an investment opportunity where we don't get any governance rights, where we don't get to play an active role in the board, in the management of the company, we would not invest. The treasury people may buy purely for investment, but that is not our investment focus. If you look at the kind of things we have done with our associates around the region, you would agree. For example, there is a lot of procurement that is done on a joint basis, there is a lot of bargaining power. SingTel and its associates have 25 million mobile subs, that is the largest mobile grouping in Southeast Asia. It actually gives significant bargaining clout with suppliers. As a result we get preferred allocation with very good prices, we get preferred allocations with a hot model. We are actually much more than a financial investor. We think we are good telecom operators, but we don't claim to be good as property owners or financial investors etc.
One of your investments has been the C2C cable network, which was always a very ambitious investment, given the amount of bandwidth available regionally. Is that one investment, with the advantage of hindsight, you wish you hadn't made? I think our objective in investing C2C was actually to achieve a much lower cost of owning submarine cable capacity at ownership level, rather than buying at IRU prices from other cable owner. So owning subsea systems is important to us. We have our customers, multinational corporations, who require connectivity in the region, so we need to use a subsea cable, and owning it, building it, gives us a much lower cost structure than buying it from other cable owners.
We've just come through the SARS crisis. What has been the SARS impact on SingTel's bottom line? Relatively muted, on a net basis. I suppose being an integrated telco helps. Parts of our business benefited. We had lots of videoconferencing, audioconference. But of course in areas like mobile roaming, we actually received a slowdown. Our shops selling equipment suffered. I think on balance the pluses and minuses offset each other, so there was not a very significant impact on our Singapore business because of SARS.
Where is SingTel's future growth going to come from? Is it from mobiles, markets like China, India? We have actually come a long way in executing our diversification strategy. The contribution of our earnings--more than 60% of proportionate revenue and more than 60% of the proportionate EBIT comes from outside Singapore. We expect Optus to continue to gain market share. Because of the very low penetration level we are actually very optimistic about the outlook both in Optus and for our overseas associates
Are you troubled by your exposure to 3G? Markets tend to go through these stages of extreme optimism, where there's only blue skies and they pay huge sums for frequencies. Now they have totally swung the other way and everybody has to write off their 3G investment. For us, we are in the very happy position where we have paid a price where we have a sustainable business case. We are now in the midst of closing our tender for 3G in Singapore, and we have actually seen a significant reduction in the prices for 3G equipment. I think that would be consistent if you ask any mobile operator. We are actually not troubled at all. We have not paid a silly price for frequency, we are going to get 3G equipment prices at a level comparable for what we paid for our 2G network. I think from a cost perspective it's not going to be an issue at all. Overall, I think it's manageable, when 3G handsets are developed to the stage where you actually can get videostreaming, enhanced messaging etc, you are going to see additional revenue streams.
When do you expect to finalize your 3G tender? We expect to issue the 3G award in the next couple of months. In Australia, Optus has already issued their 3G contract to Nokia. In Singapore, there is a regulatory deadline, December 2004, so we would be able to meet that deadline. Your one investment outside the region is Belgacom. Are you going to hang onto that? When you look at the profit contribution, the dividend contribution, both have been very strong ... Belgacom is exceptional in that it had not gone crazy over 3G auctions, actually made some money out of it, and is in a very sound position. It's probably the only AA-rated telco in Europe. So as far as investment is concerned it's a great investment. That said, I think we have since refocused our investment attention in Asia. This investment I supposed would be categorized as non-core. If you look at the shareholding structure of Belgacom, the government owns 50% plus one share, and the other consortium that Singtel is a part of, owns 50% minus one share. So, any specific decision on the company would be something that both groups of shareholders would have to work on jointly and agree on
Do you agree the role of a telco CFO has evolved rapidly since the end of the tech boom? I think the role has not changed, but the priorities have changed. The CFO will always be a business partner, helping the company understand the financial implications of the investment decisions, even some of the business decisions.There were a lot of excesses during the tech boom, the kind of M&A activity that we have seen, the 3G tenders. I think a lot of telcos have found their financial position to have weakened significantly. The new priority has been to refocus on core business and core competencies ... I think all-round we've seen a lot more discipline in the management of cash flows
Raffles Girls School Ex-Alumnis Justice Judith Prakash , judge Dr Amy Khor , Mayor Denise Phua, Member of Parliament Lim Soo Hoon, Singapore’s first woman Permanent Secretary Jennifer Yeo, lawyer and wife of Cabinet minister George Yeo Claire Chang, wife of Ho Kwon Ping- founder of Banyan Tree Holdings Chua Sock Koong, Group CEO of SingTel Kit Chan , singer Stefanie Sun , singer Corinne May, singer
Some Nanyang Technological University ( Nanyang Business School) Alumni Lim Hock San, President & CEO UIC Chua Sock Koong CEO, SingTel Choo Chin Teck, Director Keppel Land Grace Fu Senior Minister of State Teo Ser Luck Senior Parliamentary Secretary Ong Chao Choon, Partner PricewaterhouseCoopersKoh Kim Wee VP & Director Boston Consulting Group Elsie Sim, GM, Retail Sales & Ops, Shell Singapore Jolyn Teoh, Vice President Goldman Sachs London Lim Joo Lee, 2003 Rhodes Scholar Stephanie Sun, Successful Singer and 2001 Young Woman Achiever
According to sources, Some of the biggest achievers selected for Communication Awards 2007:
Allen Timpany, CEO, Vanco VNO pioneer. Now every value-added reseller wants to be the “next Vanco”.
Arun Sarin, Chief Executive Officer, Vodafone Group His deals with Google and eBay “started the Mobile Internet”. That’ll be the one regularly used by 6% of mobile owners, then.
Ben Verwaayen, CEO, BT Split local access and services in UK as an example for all the other EU countries. Then took over the broadband revolution. But has he reached the crest of the New Wave?
Bill Gates, Founder and Chairman, Microsoft Corp He may be adrift in online adland, but his company’s Communications Server has brought the LAN to life.
Carl Henrik Svanberg, CEO, Ericsson Has kept the strategy clear and built a leadership position in wireless into a total communications offer whilst others have dug themselves deeper into their problems.
Cesar Alierta, President, Telefonica Last of the great global Telco heroes? No blockbuster deals last year though.
Chua Sock Koong, CEO, SingTel SingTel veteran Chua is in the regional hotseat; tasked with making sense of the company’s expansionist strategy across Southeast Asia to Australia.
Dayanidhi Maran, Telecom Minister, India Revolutionised the Indian telecom scenario with liberalised policies, promoting Foreign Direct Investments and providing clear strategies for mobile and broadband expansion.
Dr. Saad Al Barrak, Deputy chairman and managing director, MTC MTC Group’s champion has transformed the Kuwaiti operator into a regional investment player. Can he take his 3×3x3 strategy global?
Ed Whitacre, Chairman and CEO, AT&T Retiring after driving telecom consolidation, with the integration of SBC, Cingular and AT&T. Now going after Telecom Italia and the iPhone.
Helmut Leopold, Head of Platform and Technology Management, Telekom Austria AG Put Engerwitzdorf on Europe’s IPTV map. Leads development of IPTV and IP-driven multimedia services at Telekom Austria, as well as president of the Broadband Services Forum (BSF). .
Ildar Zhuravlev, Partner, Ernst & Young He is one of the most influential persons in the Russian telecom sector. He provides consulting services to 18 of top 20 major Russian telcos. At least he isn’t being called a revolutionary.
Ivar Plahte, CEO, OnRelay ”Defining the next era of [mobile] PBX.” Cisco, Nortel, IBM, Verizon, and others are following his lead, some say.
John Chambers, CEO, Cisco Systems He’s putting Cisco on Second Life. That’s how determined he is to win this award again.
John Legere, CEO, Global Crossing Two years ago a $24 billion accounting ‘fresh start’ helped bring GX back to life. Now it is a model for how to use IT to speed up your telecoms services delivery.
John Pluthero, Executive Chairman , Cable & Wireless He’s “blown the whistle on the telecoms industry” for its lack of customer care, apparently.And he knows how to reinvigorate a demoralised company.
Josep A. Aliagas, CEO, Arena Mobile This content aggregator is currently working in 60 countries and with 110 mobile operators as well as worldwide Media Groups including Shanghai Media Group in the mobile TV area in China. China is potentially the biggest revenue generator in the industry and Arena Mobile is the leading company in China.
Larry Page, Co-founder, Google Telcos are running a bit less scared now Google is concentrating on TV and radio advertisers.
N Srinath, CEO, VSNL ”The CEO of the last year”, according to one nomination. He has “single-handedly” changed VSNL from an incumbent niche operator to a multinational telecom player, according to another. He must have a little help, though.
Niklas Zennstrom, Co-founder, Joost TV Since he sold Skype to eBay, the IP telephony service has reached 150 million users, reducing the price paid from $68 million to $23 million - per subscriber.
Patricia Russo, CEO, Alcatel-Lucent Running a combination “too big, too exotic and too powerful to be ignored.”
Phuthuma Nhleko, President & CEO, MTN Group Phuthuma has revolutionalised telecoms in Africa and the Middle East by providing telecoms to 21 countries in MEA.
Sol Trujillo, CEO, Telstra ”Creating a Telstra that is more adaptable to market needs.” Really? The “only real ass-kicker and visionary in the industry”. That’s more like it!
Steve Jobs, CEO, Apple He seems to understand consumers better than most. The iPhone has raised expections high this time.
Sunil Bharti Mittal, Chairman - Bharti Group, Bharti Airtel A “Telecoms Tsar”- in India? No, he’s “a revolutionary”. He can’t be both.
Viviane Reding, EU Commissioner, EU She has upset mobile operators, NextGen network builders and even outsourcing associations, so she must be doing something right.
Chua Sock Koong talks about her new, expanded role at SingTel, and the company’s regional growth plans.Interview by Justin Wood A management reshuffle at SingTel sees group CFO Chua Sock Koong take on extra duties this month as CEO of international operations. Chua talks about her new role at the S$12.6 bn-a-year (US$7.5 bn) telco and charts the company’s regional expansion plans as it hunts for growth. SingTel’s new management structure divides the company into three: Singapore operations, Optus in Australia, and an international division that is made up of stakes in seven mobile telcos across Asia. Each of these three divisions now has its own CEO reporting to the group CEO. Why choose this structure? If you look at how we measure our performance and how we describe our business, we have always talked about the three key parts of the business: the Singapore telco business; the Australian business; and then all our regional investments, our international business. So it’s really just rationalizing the management structure to be in line with the way we have always measured ourselves, and the way we’re being measured by the market. You’re already group CFO of Singapore’s biggest listed company. Will you have enough time to run its international division, too? It’s all about time management. And good delegation. We have a team of very capable managers who look after the day-to-day operations and who manage our projects. I’m there to provide the strategic leadership. How many hours a week do you work? I wouldn’t want to frighten you! It’s important to strive for a healthy work/life balance, and to make time for my family and my two daughters, but I do work very long hours.
How will you divide your time between being CEO of international business and being group CFO? It’s difficult to say. Both portfolios are of equal importance, but the split won’t necessarily be 50/50. It will depend on what is most important and what requires my time. It will be about prioritization. Within the international division, SingTel has stakes in seven mobile operators in Asia besides Singapore. What is their contribution to the overall group? Because we equity account our associates, the most relevant measure to use is EBITDA. So, from that perspective, if you look at the EBITDA of the three divisions, then Singapore, Australia, and International are all roughly the same size. With growth proving elusive in the Singapore and Australian markets, SingTel is looking to its international arm to power the firm forward. Do you foresee the international division becoming the largest part of the company? Yes, growth for the group in recent years has been driven largely by the international business, by our regional associates in Asia. If you look at Bharti in India [SingTel’s stake: 30.7%] and Telkomsel in Indonesia [SingTel’s stake: 35%], they are in relatively unpenetrated markets and we continue to get good growth from them. Most of our growth will continue to come from our international operations. Our IT business, which is also part of the international division, has been growing in double digits recently too. So I suppose you could say that I have all the growth businesses in my portfolio. During 2005, SingTel increased its stakes in Bharti and Globe Telecom in the Philippines (SingTel’s stake: 44.6%). As the new CEO of international, will you be looking to raise the stakes in all your regional associates? And to what sort of level? In the longer term we would like to get to a position where we play a bigger role in the associates, and build them up as subsidiaries rather than associates. Of course, that’s a longer term objective and is subject to our partners’ willingness to sell, and to the terms and conditions they offer. And then also, in a lot of the Asian countries, the regulatory frameworks prevent foreigners from owning a majority stake and from managing the operations, so that would need to change first. We are quite realistic that this won’t happen overnight. And we are not impatient. What about Advanced Info Service (AIS), your mobile operator in Thailand? SingTel already owns 21.4%, and the market is full of rumor that you are maneuvering to buy a further chunk of AIS currently owned by Prime Minister Thaksin Shinawatra’s Shin Corp. I can’t comment on specific companies, but our general long-term objective remains to increase our stakes in our associates under the right terms and conditions. Thailand, of course, still has a 49% limit on foreign ownership (of telcos). (Shortly after this interview, on January 23, Temasek, the investment arm of the Singapore government which owns around 63% of SingTel, announced that it had teamed up with a group of Thai investors to buy 49.6% of Shin.) SingTel’s international strategy is focused firmly on Asia. You have operations in Indonesia, India, Thailand, Bangladesh, Philippines, Hong Kong, and Taiwan. Where next? Our main focus is to build our stakes in existing associates. That is the first priority. However, we are also looking at new countries with low tele-densities, and preferably large populations. Some of these countries had very low income levels so we didn’t look at them previously because they didn’t have a viable business case. But recently there have been changes in the economics of the mobile business that have made them more attractive. In particular, I’m referring to the development of the micro pre-paid model. If you are in a developed market like Hong Kong, you buy a mobile pre-paid card and the minimum denomination is something like US$5 or US$10. But if you go to Indonesia or India, you can buy a pre-paid card for less than US$1. The analogy often used is that, in developed countries you buy a bottle of shampoo, but in the poorer countries you buy just a sachet. So, instead of buying a large block of pre-paid air-time, you buy a very small block. Just as importantly, the cost of handsets has come down significantly. A number of the mobile phone suppliers have started producing very low-priced handsets. You are talking about price points between US$20 and US$50. Getting a handphone is now no longer so prohibitive. And, of course, there is now also a very large market of second-hand handsets that can be bought for very low prices. So changes in the dynamics of the mobile industry mean that a number of countries which previously had income levels that were too low, now offer much more viable business cases. Do you have any particular countries in mind? A good example would be our recent investment in Bangladesh. (In June last year, SingTel paid US$118m for a 45% stake in Pacific Bangladesh Telecom.) It has a population of 140m, but mobile penetration is only about 5%. Singapore was the first telco to adopt an aggressive regional growth strategy. Now many other Asian players are doing the same. Is competition in the regional M&A market getting stiffer? Actually, I don’t think SingTel was the first. In the first wave, we had a lot of US firms investing in Asia, the likes of Bell South and Bell Atlantic. They invested here but then retreated. Then it was the turn of the European telcos. Deutsche Telekom and BT of the UK invested very aggressively in this region but, with the exception of Telenor, most of the European players have now exited. Frankly these things come in cycles. Now we have a number of Asian players expanding into the region, and of course, we’ve got Middle Eastern players now in the M&A market as well. So it is not the case that we have had the market to ourselves in the past. There have always been different players, all of them behaving in different ways. Some of them are quite aggressive and less price-sensitive. For example, if you have a lot of oil revenue behind you then you can probably be a little less price-sensitive in making acquisitions.
Where SingTel stands out is in our execution. We’ve been very disciplined in our approach to new investments. If there are deals where we’re not comfortable, we won’t overpay. I think you’ve seen this with the Pakistan Telecom privatization (26% of Pakistan Telecom was put up for sale in June 2005). We put in a price that we felt was appropriate but which turned out to be the lowest. We lost the deal, but we weren’t unhappy. (Etisalat, a telco based in the United Arab Emirates, won the bid.) We felt we should only bid to a level where we know that if we won we would be creating value for shareholders. We are not deal-junkies. That said, we are not averse to taking calculated risks. I think people look at our Telkomsel investment, and they forget that when we made it, Indonesia was considered by many observers to be almost a basket case. Everybody was just rushing to get out. We bought our stake from KPN of the Netherlands, and they were keen for various reasons to get out. When we bought our stake in AIS in Thailand, that was just at the start of the Asian financial crisis. So we are prepared to take calculated risks. We bought these assets when they weren’t necessarily under the most rosy conditions. But of course, if we come to a situation where we think there are no good deals, we are quite happy to return money to shareholders. Things do come in cycles. When the valuations correct themselves, we will be happy to go back to the market. As part of the international business, you are also looking after NCS, your wholly-owned IT services subsidiary. NCS has a strong position in Singapore but is small elsewhere. Does it have the scale to be successful? NCS is the number one IT service provider in Singapore, but it’s true, regionally NCS is small. However, I think you have to look at where NCS came from. It started life as the in-house IT department for the Singapore government. So it is unique in the sense that it has significant e-government domain knowledge. What NCS is able to do now is to use that knowledge to win contracts from a lot of the governments in the region who are keen to improve their operating efficiency. We have worked on healthcare system management in Hong Kong, and on improving systems for immigration. There have been a number of projects in the Middle East and in Sri Lanka.Only 17% of NCS’s revenues come from abroad, but we certainly want to get that much higher, probably to about 30% in three years’ time.
Singapore has appointed former ambassador Steven J. Green as the country’s Honorary Consul-General for Florida, based in Miami. Since September 2002 he has also held the honorary post of special advisor to the Singapore government. Speaking to Singapore’s Straits Times newspaper, Ambassador Green said that he was delighted at the “opportunity of continuing to be helpful to Singapore.” As Honorary Consul General, he said he would seek to create more opportunity for commercial activity between both counties, focusing on multinationals as well as small and medium-sized ventures. Ambassador Green previously served as U.S. Ambassador to Singapore from November 1997 to March 2001 and was also on the President’s Export Council under former President Bill Clinton. Ambassador Green currently owns an investment company, Greenstreet Partners. Ambassador Green attended the University of Miami and the New York Institute of Finance. He is married and the father of two daughters.
Steven J. Green sgreen@greenstreetpartners.com Ambassadorial Post Singapore, 1998 - 2001 After nearly three decades of business leadership, Steven Jay Green was sworn in as the twelfth United States Ambassador to the Republic of Singapore on November 18, 1997. He concluded his service on March 1, 2001.
During Ambassador Green’s term, he spearheaded a number of strategic programs that greatly enhanced US-Singapore alliances in economic development, intellectual property, immigration and national security. Many of his accomplishments greatly expanded American business opportunities in Singapore and other ASEAN markets.
To address the challenges of the Asian financial crisis, Ambassador Green created and led the regional response program that linked all ASEAN Chiefs of Missions in a continuous assessment of regional markets and provided a direct communication network for American businesses impacted by the economic turmoil. As an extension of this effort, Ambassador Green organized and directed a now regular series of US government-led regional trade missions for US businesses pursuing ASEAN-wide strategies and seeking consistent host government investment and development regimes.
Ambassador Green also led his embassy to create new export and investment programs for America’s small and medium size enterprises. Through his “Gateway ASEAN” initiative, Ambassador Green launched a pilot program between the US Chamber of Commerce and Singapore’s Productivity and Standards Board to create an interactive marketing, sales and distribution channel linking millions of US SMEs to prospective customers throughout the region. In 1999, Ambassador Green helped launch Singapore’s Technoentrepreneurship Fund providing over a billion dollars of Singapore venture capital to American technology companies.
Ambassador Green’s record of success in energizing and expanding America’s business interests in the region culminated last November when he directly led the effort to commence bilateral negotiations for a free trade agreement between the United States and Singapore.
Ambassador Green also increased American corporate citizenship in Singapore by founding Friendship Works, a model program targeting US business philanthropy and related volunteer action to specific areas of need in community building, education and health care.
Prior to his appointment, Ambassador Green compiled a 25 year record of success as an international industrialist leading major corporate restructurings and expansions for manufacturing, housing, consumer products, retail and real estate enterprises. He was and now returns to the position of Chairman and CEO of Greenstreet Partners, a private merchant bank.
From 1988-1996, Ambassador Green served as Chairman and CEO of Samsonite Corporation. Samsonite was formerly the major operating subsidiary of Astrum International Corporation where he also served as Chairman and CEO from 1990-1995 and directed the strategic management and operations of Samsonite and its affiliates, American Tourister and Culligan Water. Samsonite and Culligan became separate public companies in 1995.
As Chairman of Astrum, Ambassador Green led the operating companies’ expansion into emerging markets in Eastern Europe, Russia, Asia and the Middle East. In 1992, he opened the first American retailing center on Red Square with Samsonite’s “World of Travel” store. In 1995 and 1996, Samsonite began major production, marketing and distribution projects in the ASEAN countries, India and China.
In 1995, President Clinton appointed Ambassador Green to the President’s Export Council where he served on the Executive Committee and chaired the Strategic Communications Committee.
In addition to his corporate leadership and public service, Ambassador Green has been active in national civic affairs through the Green Family Foundation (www.greenff.org), an organization dedicated to supporting social programs, which include HIV/AIDS prevention and education, access to the arts, youth and education, homeless assistance, disaster relief, and community outreach. He has served as a trustee and program chair for the Children’s Health Fund, the United States Olympic Committee’s Champions in Life program, the United Way and Florida International University.
Ambassador Green is a board member of the University of Miami and the United States Chamber of Commerce. He is also a board member of Knowledge Universe Holdings, KLC Knowledge Learning Centers, and Greenstreet Real Estate Partners, a company that manages a large portfolio of education-related real estate. Ambassador Green was appointed Chairman and Chief Executive Officer of K1 Ventures Limited, a publicly traded investment company in Singapore. In addition, Ambassador Green serves as Honorary Consul General of Singapore in Miami, Florida.
Ambassador Green is married to Dorothea and has two daughters, Andrea and Kimberly. They are also proud grandparents of Steven Wesley and Olivia Tyler.
US Ambassador to Singapore from November 1997 to March 2001. Mr Green spearheaded a number of strategic programmes that greatly enhanced US-Singapore relations in economic development, intellectual property, immigration and national security. He is currently a Special Advisor to the Singapore Government, and is also a director of Vistage International, Inc., Knowledge Schools Inc., Cardean Learning Group, Greenstreet Capital Management, Inc. and Long Haul Holdings Corp. Mr Green is the founder of merchant bank Greenstreet Partners, and the founding partner of a real estate investment company with real estate holdings throughout the United States. Mr Green has had 25 years of experience as an international industrialist leading major corporate restructurings and expansions in a host of manufacturing, housing, consumer products, retail and real estate enterprises. He served as Chairman and CEO of Samsonite Corporation from 1988 to 1996 where he oversaw the recapitalisation and subsequent turnaround of the company to a highly profitable business. In addition to his corporate responsibilities, Mr Green is also active in national civic affairs. He serves as a contributing trustee for a number of community and national charities, including the Children’s Health Fund and the University of Miami Advisory Board. He is also the Chairman of the Green Family Foundation.
After a lull, Indonesian money is on the move again. What's behind the action and should Jakarta and the Lion City worry?By Alejandro Reyes THE ANNUAL SHOPPER'S BONANZA is known as The Great Singapore Sale. This year, the island-wide discounts ended in July. Tell that to Indonesia's tycoons. The joke in Singapore's business circles is that the Big Sell_Off is still on -- this time, the foreigners are buying up local companies. Two weeks ago, the judicial managers of ailing property and electronics group Amcol announced that they had accepted a rescue package proposed by Sinar Mas, Indonesia's third biggest conglomerate. Days later, kretek (clove) cigarette magnate Putera Sampoerna launched a bid to take over telecommunications equipment supplier Transmarco, whose biggest shareholder at the time was Sukamto Sia, another Indonesian businessman. Sukamto also holds a major chunk of Amcol stock. The moves came in the wake of Jakarta's worst riots in three decades, the result of a government crackdown on the political opposition. "It's more than a coincidence," says one Indonesian palm-oil trader who looks after the family business in Singapore. Adds Simon Koh, an analyst with Deutsche Morgan Grenfell: "Through public listings in Singapore, businessmen can convert their assets to cash. These could be signs of plans to move out." Others disagree. "I don't see these as moves on the political chess board's end game," says Eugene Galbraith, president-director of Hoare Govett Asia Indonesia. He regards the takeovers as an indication of the growing clout of Indonesian businesses and their need to expand regionwide. Whatever the reason, Singapore is in no danger of being swallowed up. To date, Indonesian-controlled companies account for less than 1% of the stock market's total capitalization. But last year, the Stock Exchange of Singapore censured Sukamto and fellow Indonesian Johannes Kotjo for breaching bourse rules. Both snapped up small listed Singapore companies in 1995. Also casting a cloud: the near collapse in July of Amcol, 17.3% of which was acquired last year by Indonesian tycoon Henry Pribadi and Sudwikatmono, a cousin of Indonesian President Suharto.
So it is perhaps appropriate that another Indonesian company is helping mop up the mess at Amcol. Controlled by ethnic Chinese Eka Tjipta Widjaja, 74, Sinar Mas has proposed forming a new Singapore holding company, known tentatively as Newco, that will buy the virtually bankrupt firm. Sinar Mas will inject $2-billion in assets -- mainly Indonesian holdings in food processing, agribusiness, property and distribution -- into Newco. Amcol stockholders will receive four $1-Newco shares for every three in Amcol, plus a Newco warrant for every 10 Amcol shares. In effect, Sinar Mas values Amcol shares at $1.34 each. The accounting firm Price Waterhouse had said the stocks were nearly worthless. In July, the courts named Price Waterhouse temporary manager of Amcol pending a rescue or a restructuring. Amid a boardroom struggle between Pribadi and Sukamto, who owns 14% of Amcol, government-appointed probers uncovered irregularities that made it difficult for Amcol to pay its debts. Price Waterhouse said the group needed more than $70 million to meet its obligations. Despite a warning that Amcol's assets, valued at $818 million early this year, might all be required to cover obligations, nine bidders including Pribadi and Sukamto submitted rescue proposals. Of the nine, Suntec Investment, a powerful group of Hong Kong investors who built Singapore's new convention and exhibition center, was said to have the inside track. Suntec backer Cheng Yu Tung, a leading Hong Kong property magnate, was chairman of Amcol until he stepped down for undisclosed reasons last year. Others in the consortium include high-powered billionaire Li Ka Shing and shipping tycoon Frank Tsao. Sources say Suntec's negotiators laid out an attractive plan -- then backpedalled when serious negotiations got underway. Amcol's judicial managers then turned to Sinar Mas, even though the Indonesian conglomerate was not exactly a favorite in Singapore. In 1990, Eka Tjipta Widjaja's second son, Oei Hong Leong, sold his stake in Singapore conglomerate United Industrial Corp. after keeping everyone guessing about his intentions. Singapore regulators saw the move as the act of an asset-stripper who takes over a company and moves on. Oei is now based in Hong Kong, where he has built up China Strategic into a major investor in the mainland. The Widjaja family's attempts to establish a foothold in Singapore, particularly for its Bank Internasional Indonesia, had been rebuffed since. Amcol presented them with a golden opportunity. The rescue package that Eka's eldest son Teguh Ganda Widjaja and fourth son Muktar Widjaja presented to Amcol's managers was worth $166 million more than Suntec's. "They knew they had to pay a premium if they were to get the official blessing," says an Indonesian executive in Singapore who knows the Widjajas. That the group pulled it off indicates how it has evolved in recent years. Sinar Mas is still essentially family-run, with patriarch Eka at the helm and the children in charge of key divisions. But the conglomerate now has a strong corps of professional managers, some of them experienced Filipino executives.
"What Sinar Mas intends to do is to set up a flagship in Singapore," says the source close to the family. That is also what Putera Sampoerna seems to have in mind for Transmarco. The third-generation head of Hanjaya Mandala Sampoerna, Indonesia's most profitable cigarette supplier, sees Transmarco as an ideal vehicle to oversee tobacco and other businesses in Malaysia, Myanmar and Vietnam, says analyst Galbraith. Last week, Sampoerna, 48, increased his stake in Transmarco from 32.1% to 66%, replacing Sukamto as the company's largest shareholder. Sampoerna's reported plans to build up Transmarco into a flagship for regional operations has triggered concerns in Indonesia, where investors have been wondering just what the tobacco tycoon is up to. The tycoon already spends most of his time in Singapore. A graduate of the University of Houston, he and his American Chinese wife Katie Chow consider the island republic as their second home. Sampoerna ran the family's Malaysian palm-oil and rubber plantation business from Singapore for ten years before returning to Surabaya in 1980 to join the cigarette operations. He took over from his father in 1986. Since the elder Sampoerna's death in 1994, Putera has been trying to professionalize his empire, bringing in executives from Singapore, Taiwan, the U.S., Korea and Indonesia. Are Sinar Mas and Hanjaya Mandala Sampoerna moving out of Indonesia? Not necessarily. True, some Indonesian Chinese have been acting with extreme caution as the government pushes a more equitable distribution of wealth. Sinar Mas has also been under pressure from the Forestry Ministry, which in 1993 accused the conglomerate's Indah Kiat pulp and paper subsidiary of using illegal timber in its South Sumatra operations. The company paid a $570,000 fine although executives insisted they had done nothing wrong. Sinar Mas also had a run-in with the government over labor importation. But Galbraith, for one, says Sinar Mas and other big Indonesian companies are more concerned about setting up a platform for expanding regional operations rather than escaping political problems at home. "These people definitely have regional aspirations," he says. "Indonesia is booming and people are fanning out."
That is not a new trend. Indonesian tycoons have long been diversifying their portfolios. Billionaire Liem Sioe Liong's Salim Group and the Lippo Group of the Riady family, for example, have a second home base in Hong Kong. Indonesian money has been active in Singapore for years, with most of the country's wealthy Chinese businessmen parking substantial funds in trusts, property and other assets in what is widely regarded as the region's safest haven. "Singapore is a natural choice for them," says analyst Koh. "Many have lived and gone to school here. Their wives come and shop here on the weekends." Unlike Galbraith, however, Koh believes that Indonesian politics is part of the tycoons' calculations. "There has been capital outflow from Indonesia all along," he says. "With the declining value of the rupiah, many Indonesians started keeping Singapore dollar accounts. After the Medan riots in 1994 [when Chinese businesses were looted], capital outflow accelerated and some tried to shift their assets out." The influx peaked last year. Dominating the action were Johannes Kotjo, once a director of the Salim Group, and Bambang Trihatmodjo, President Suharto's second son and head of the Bimantara group. Between them, they bought a number of listed companies, including ice-cream supplier and restaurant operator ABR Holdings, construction company L&M and United Pulp & Paper. The stock exchange reprimands of Kotjo and Sukamto slowed the Indonesian advance. Kotjo was censured for his remarks to Bloomberg news service on the possible takeover of United Pulp by a consortium of which he was a member; Sukamto for failing to disclose a pending lawsuit against him in Hawaii. Soon after, the Stock Exchange of Singapore warned that it would not "hesitate to take action against any listed company and its directors if they fail to comply with the exchange's requirements." Says a securities analyst: "The Monetary Authority of Singapore and the SES were worried about Indonesians cornering the market and then leaving. After that, Indonesian-interest stocks didn't perform [well] anymore."
The Amcol debacle further dampened enthusiasm. Many of its investors were Singaporeans who used their Central Provident Fund savings to buy the counter; the government had classified Amcol a "trustee stock" eligible for such purchases. The company has been taken off the recommended list. All these underscore worries about Indonesians and other foreigners moving into the Singapore market. Whether their purpose is to establish a regional headquarters or to diversify risk because of turbulent domestic politics, Indonesian investors find themselves operating in a commercial environment vastly different from what they may be used to at home. Singapore prides itself on its success in stamping out corruption and its tight regulatory framework. Regulators are also wary of volatile stock price movements. That extends to the property market. A surge in Indonesian buying of Singapore flats was nipped when the government introduced measures to curb speculation in March. But the emergence of Sinar Mas as Amcol's white knight has renewed interest in Indonesia-linked stocks. It also suggests that Indonesian money is heading for Singapore again. Indeed, other established players like Liem are expanding. About 10 months ago, Qualif, a unit of KMP, the Salim Group's investment arm in Singapore, became a major shareholder in food conglomerate QAF. In July, Qualif raised its stake to 33.2%. Liem has now made a general offer to buy all the shares. The Salim Group has not made clear its intentions for QAF, which had previously been controlled by managers appointed by the Brunei royal family. But like the moves of Sinar Mas and Sampoerna, its actions are closely followed in both Singapore and Indonesia. "We understand that every country has rules and regulations and we, as foreigners, have to be careful to learn from others' mistakes," Pribadi told a Singapore daily after Kotjo and Sukamto were censured. The tycoons know what they are doing. --With reporting by Keith Loveard / Jakarta and Santha Oorjitham / Singapore
IT DOES NOT TAKE A GENIUS TO UNDERSTAND the inexorable arithmetic of banking survival in Singapore. There are four major banks today. If, as expected, a government blueprint for banking reform due this month allows unfettered foreign access to the banking industry within five years, that number could well drop. "There is room for consolidation," says Deputy Prime Minister Lee Hsien Loong, "but we hope there will be at least two Singapore institutions." In this high-stakes variation on musical chairs, one Singaporean bank likely to find a secure seat is Singapore's largest bank, state-controlled DBS. That leaves one chair for three big competitors. Which two will fail? Obviously, it is not quite this simple. Perhaps none will survive as strictly Singaporean entities; maybe all of them will. Whatever happens, Singapore is on the cusp of a scramble for banking business that is likely to force major changes on traditionally stolid institutions. A few early, easy changes are already apparent. Singapore's second-largest bank ranked by assets is Oversea-Chinese Banking Corp. (OCBC), a 67-year-old bank trying to shake a hidebound image. Its latest promotional brochure is called "OCBC 3.0," an attempt to convey that the company is updating itself as rapidly and regularly as a new software program. Overseas Union Bank, the fourth-largest of Singapore's Big Four banks, counters with an image brochure called "OUB 2000." The final major, United Overseas Bank, hasn't yet engaged in the public relations war over which of the big players is Singapore's most visionary bank. Time will tell if that decision, taken by the only remaining major family-run bank left on the island, reflects a lack of imagination or a cunning, but hidden, strategy for the future. "There could be all sorts of different combinations but one thing is certain: We will see mergers among the top Singapore banks sooner rather than later," says Tony Raza, analyst for Daiwa Institute of Research in Singapore. If that is true, the two biggest banks by market capitalization, DBS and OCBC, would probably have the upper hand. OCBC, with a market cap of more than $11 billion, has been rumored to be interested in taking over OUB - market cap $4.2 billion.
OUB, run by former Citibank executive Peter Seah Lim Huat, is not going to passively wait for a takeover. The company has decided its best chance for survival is to target high-end banking customers. OUB first starting heading in that direction in the 1980s with the purchase of the Singapore credit card operations of Chase Manhattan and what was then Bank of America. Until recently, that was merely one piece of a broad-brush approach. Three years ago, Seah told analysts that OUB was really the only regional bank in Singapore - it had the highest overseas contribution to overall profit of any major competitor. Today, after a regionwide recession that began almost two years ago, he is sheepish on the subject. He'd rather talk about the niches OUB has pursued in loan syndication, especially in Australia, and in serving middle- and upper-income customers at home. The strategy may also reflect the fact that OUB has seen the writing on the wall when it comes to pursuing a broad range of customers: Giant rival DBS now has close to 40% of local deposits and OUB does not have widespread branch and ATM network that the average customer wants. "We've always taken a very cautious approach to making regional acquisitions," says Seah. "That explains why we are the only Singapore bank with no joint ventures in Indonesia and no bank in the Philippines although we have an offshore branch there." Seah concedes that Singapore banks must grow and improve their technology and expertise. But he doubts that OUB will make any major changes this year: "Strategically, it would be prudent not to overstretch our capital base." Family-owned but, unlike United Overseas Bank, run by an outsider, OUB may have become resigned to the reality of the market. Seah notes how difficult it is for family-controlled banks to come up with the capital that is sometimes needed. "All options should be considered," says Seah. "I would not say that we must stay independent." Careful consolidation is a strategy that contrasts with OCBC. Chief executive officer Alex Au is said to be focused on aggressively pursuing higher growth and increased profitability. Au, born in Hong Kong, earned his banking stripes in the competitive Hong Kong market, where profits are paramount. In banking, that usually means attracting higher-margin retail customers. Au says the company intends to focus on the broad needs of its mainly Chinese customers in Singapore, Malaysia and, eventually, Greater China. "We believe we can build a sustainable competitive advantage servicing consumers and businesses in these locations," says Au. This might mean, he says, acquisitions in Hong Kong and throughout the Greater China region to "supplement organic growth."
It is difficult to figure out the precise strategy of United Overseas Bank. Wee Cho Yaw, the 71-year-old chairman of the bank, has given few clues other than to state blandly that the company wants to enhance shareholder value and focus on return on equity while looking for growth opportunities. SG Securities bank analyst Michael Sia says Singapore banks should be thinking about how to improve loan margins to achieve the kind of profitability that Hong Kong banks have come to expect. Part of the problem is a structural difference in where the banks lend: Half of Hong Kong loans are mortgages, which are typically high margin and safe. Sia says only 17% of Singapore bank loans are mortgages - most residents buy government-subsidized housing and use their own retirement-fund accounts to help finance the purchase. In addition, Hong Kong corporate loans generally support smaller companies that pay higher rates, whereas Singapore borrowers are often multinationals and government-linked companies that qualify for the lowest rates. The Singapore government clearly sees consolidation as a key to closing the profit-performance gap. Last year, the fifth- and sixth-largest banks merged to form Keppel-Tat Lee Bank. The new entity still isn't big enough to break into the Big Four, but it is closer. Not for long, however, if the betting is correct that DBS will absorb the merged bank. The real wild cards as the industry shakes out could come in the form of foreign banks that seek entry into the market by buying significant Singaporean partners. Standard Chartered, the London-based bank that recently bought Bank Bali in Indonesia as well as the Thai bank, Nakornthorn, has emerged as a player. HSBC and Citibank already have major presences in Singapore and are also possible merger partners for the remaining Singapore banks. Let the music begin.Do you have something to say about him? We all know that most publications are edited many times before being released and so may not be a useful guage for a person's integrity, character e.t.c. This site seeks to uncover the REAL persona behind the facade, be it good or bad so that, Number 1, we hold them accountable. Number 2, the public can make informed decisions before investing money in their organisations. Having a good Management team is important in investing. Number 3, to know that there is still a side of them we may not yet know
Of the many phone calls Singapore-based fund manager Julia Ho received from relentless bond salesmen late last year, one stands out. This salesman, from a leading international firm, made a hard-sell pitch for high-yield bonds issued by Asia Pulp & Paper Co. It sounded irresistible. APP, with $3 billion in revenues, had new, state-of-the-art paper mills across Asia, plenty of fast-growing hardwood in Indonesia, and had moved into the booming China market. It was one of the few big local conglomerates with revenues mostly in hard currency.
Of course, there was the little matter of APP's $13.4 billion debt. The pitch acknowledged that. ``This is a very highly geared company,'' Ho, the investment director of Rothschild Asset Management (Singapore), recalls the salesman as saying. ``But the fact that they were able to survive the Asian crisis is an indication of how capable the management is.'' The salesman referred to APP's founders, the Widjajas, an ethnic Chinese clan from Indonesia.
Ho went ahead and bought about $500,000 of the bonds on the secondary market. She admits she skimmed the pages of the offering prospectus that described the possible problems, assuming they were the usual boilerplate. The salesman ``did not highlight the risks,'' she recalls. Ho won't identify him, or the issue, but was reassured because a top Wall Street firm had signed the prospectus. The yield was well into the double digits.
Ho and other APP investors before her should have been more wary. Since the mid-1990s, documents supporting APP bond and share issues warned of the downsides, from staggering interest costs to volatile world paper prices to political and currency instability in Indonesia, home to most of the company's operations. A 1999 prospectus for $500 million in convertible notes, for example, was blunt about the company's finances: ``We expect to incur significant additional indebtedness over the next few years....Such financing or any refinancing may not be available on terms acceptable to us, especially in light of the recent conditions in Southeast Asia and international credit markets and recent credit-rating downgrades.'' Rating agency reports detailed the risks as well.
Sure enough, in February, 2001, after a 20% plunge in global paper prices over three months, APP defaulted on its bank loans and bonds. The default triggered what has become one of the biggest investment debacles in the history of modern Corporate Asia. ``It could be considered the worst of the largest [defaults],'' says Mark Mobius, director of Templeton Asset Management in Singapore, ``because it involves so many people and so many different kinds of assets.'' While Rothschild bailed out before the collapse, hundreds of other institutional investors and creditors didn't. They now hold paper worth pennies on the dollar. Some banks and finance companies are suing in Singapore, where APP is headquartered, in the hope of recovering some $62 million. Equity investors also have been stung. On July 3, the New York Stock Exchange moved to delist APP's American depositary receipts, whose value had plunged from about $11 in 1995 to a recent 12 cents.
As the creditors, auditors, and lawyers pick through the wreckage, disturbing questions emerge. Here was a company that won the confidence of investors by securing the imprimatur of the world's leading financial firms, including Merrill Lynch, J.P. Morgan, Morgan Stanley, CSFB, and Goldman Sachs, which collectively underwrote billions in APP bonds and equities. Arthur Andersen, the parent company's auditors since 1994, signed off on its books. APP securities passed muster with regulators in Singapore and Washington. Yet it turns out nobody outside APP really had the full picture of the company's finances, which included a bewildering variety of debt offerings issued by offshore subsidiaries. Nor did Westerners ever penetrate what was, at heart, a traditional ethnic Chinese family company.
J.P. Morgan, CSFB, Merrill Lynch, Goldman Sachs, and Arthur Andersen all declined to comment for this story. In the end, it will be very difficult to trace the money the banks raised for APP in the six years since its creation. What is known about the cost of APP's mills, its interest payments, and its reported bank deposits leaves some $3 billion to $4 billion unaccounted for, according to several financial analysts who have crunched the data. APP also lost money in derivatives investments and real estate in the region. There are three audits underway now, but the company has yet to give a full accounting.
Not everyone was fooled. ``It was such an obvious disaster waiting to happen,'' says Hugh Young, managing director of Aberdeen Asset Management in Singapore, whose firm did not buy any APP bonds or shares. What turned him off were derivatives losses in 1994 and 1995, the company's opaque structure, and a record of payment disputes with suppliers. Young figures that even if paper prices hadn't plunged, APP's cash flow probably wouldn't have covered its debt payments for long, given the rate at which it was borrowing and investing. Yet some of America's biggest asset management firms, including Fidelity, New York Life Insurance, Putnam Investments, Massachusetts Mutual, and John Hancock Financial Services, bought APP securities. ``TOUGH NUTS.'' APP is an excellent lesson in the problems of emerging-market corporate finance. Fee-hungry Western investment banks, investors greedy for yield but blind to regional risk, lax regulators, a local company with global ambitions but little regard for corporate governance--they all contributed to the disaster. Similar combinations produced meltdowns at many Asian conglomerates in the 1990s, including Thailand's Alphatec, Indonesia's Bank Central Asia, and China's Guangdong International Trade & Investment Corp. To be sure, investment bankers point out that most buyers of APP's paper were mutual and hedge funds that specialize in junk bonds--not widows and orphans. ``Investors bought these bonds knowing they were high-risk securities,'' says a senior executive at Morgan Stanley's capital markets group in Asia. But debacles such as APP's have poisoned the region's markets. ``The sharp decline in asset prices in Southeast Asia and Indonesia in particular since mid-2000 can largely be put at the door of APP,'' says Elizabeth Wood, managing director of Chinawood Associates, an Asian distressed-debt advisory firm in Singapore.
At the center of this drama are the Widjajas. Eka Tjipta Widjaja, the 77-year-old Chinese-born patriarch, started out selling dried meat and tea to Indonesian soldiers fighting against Dutch colonial troops in the 1940s. He went into the pulp and paper business in the 1970s, helped by government subsidies for the forest plantations he acquired under former President Suharto. APP is part of the Widjajas' Sinar Mas Group, which also has vast holdings in banking, real estate, and food processing.
Since the early 1990s, Sinar Mas's daily operations have been run by Eka Tjipta's eldest son, Teguh Ganda. According to one analyst who has dined with him, Teguh Ganda doesn't appear to be conversant in the complexities of the international bond deals he signed off on. ``None of the Widjajas had an understanding of finance,'' says the analyst. Nevertheless, says an investment banker who has worked for APP, ``the managers and owners are tough nuts. Very secretive. Very clanny. They can be very evasive.'' Neither the Widjajas nor any APP executive would comment for this story. Kenneth C. Ellis, a partner at the law firm White & Case, who represents APP in talks with its creditors, did not respond to repeated requests for interviews or to written questions.
In the early 1990s, the Widjajas successfully raised millions from foreign investors through several issues on Jakarta's stock exchange floated by their Indonesian company, PT Indah Kiat Pulp & Paper. But they never would have been able to raise their billions in the overseas debt markets had it not been for their chief financial officer, Hendrik Tee, who holds a BA and MBA from the College of William & Mary in the U.S. According to APP public-relations material, he worked for Chase Manhattan Bank before joining Sinar Mas in 1993. TAX HAVENS. Tee's notion, say analysts and investment bankers who have worked with him, was to turn APP into an international player. The plan was to add more sophisticated mills in Asia, then boost share rapidly in the region--especially in China, the world's second-biggest paper market. Tee's first step was to move the company's headquarters from Jakarta to Singapore, where all the scattered operations of the Widjaja family were consolidated into APP as a holding company in 1994. The idea was to put some distance between the company and its past. ``If one portrays oneself as Indonesian, money costs a lot more than it does for a Singaporean,'' an auditor in Jakarta told BusinessWeek in late 1994, when the company was being formed.
Tee's next coup came in April, 1995, when he got APP's American depositary receipts listed on the New York Stock Exchange. Morgan Stanley, CSFB, and Nomura International (Hong Kong) Ltd. underwrote the $330 million offering. The listing followed a 24-day Widjaja road show that hit 27 cities in 10 countries. Management zipped around in two Gulfstream jets. Investment bankers and analysts who have met Tee describe him as a smooth talker who skillfully played the eager investment bankers against each other. The Widjajas had their role, too. Over 16-course Chinese dinners, Teguh Ganda charmed investors with stories of his humble college education in China during the Cultural Revolution and his days working in a railroad switchyard. ``He didn't come across as an operator,'' says an analyst who dined with him in Singapore that year.
But the Widjaja team did have a well-honed pitch. Its Indonesian hardwood matured in a third of the time that North American trees did, making its acreage more productive. While its rock-bottom costs were in cheap local currencies, its revenues were in dollars and other hard currencies.
The stock offering was a hit. The shares, which started trading at around $11 in 1995, rose as high as $16.69 by October, 1997. The initial public offering brought Wall Street to the door, looking both for equity and bond business. Over the next five years, Morgan Stanley, Merrill Lynch, Goldman Sachs, and J.P. Morgan underwrote a total of $5.6 billion in bonds for APP and its subsidiaries.
When Asia's financial crisis hit in 1997-'98, the investment banks still managed to sell APP's bonds as the great Asian recovery play. One fund manager, who asked not to be named, says her U.S.-based firm, which lacked an Asia research team, bought the bonds because a major investment bank had underwritten them. ``If Morgan Stanley or Goldman signs a prospectus, there's an assumption that it's sort of O.K.,'' explains Aberdeen's Young.
Meanwhile, as the debt piled up, it became increasingly hard to track. Starting in 1995, Tee created dozens of companies incorporated in such tax havens as the Cook Islands, the Cayman Islands, and Mauritius. Many corporations use shell companies to reduce the tax liabilities of deals, but APP created a new shell company for almost every new issue. To get the full picture of APP's structure, investors would have had to scour through several prospectuses. ``You can't track it. There are too many companies involved,'' says an investment banker who worked with APP last year.
Also, some of the largest deals were never filed with the U.S. Securities & Exchange Commission. They were private placements and were thus exempt from registration under Rule 144A of the U.S. Securities Act, which allows underwriters to sell such securities directly to ``qualified institutional buyers,'' say investment bankers familiar with the deals. In 1997, Goldman, Sachs & Co. privately placed $845 million in APP bonds. Between 1997 and 2000, J.P. Morgan & Co. arranged more than $1 billion in financing for the company in this manner. There's no requirement to disclose the deals to the public, although the additional debt was included in APP's prospectuses. TOO FANCY. As the debt issues began to pile up, some investors and analysts grew uneasy. In 1995, the company's interest payments were $448 million. By 1999--the last year APP reported full-year results--annual interest payments had climbed to $658.6 million. That year the company lost $23 million. According to Standard & Poor's, APP's interest coverage--the ratio of cash flow to interest costs--averaged only 1.5 from 1996 to 1998, far below that of blue-chip debt issuers in the global pulp and paper industry. That meant that the company generated only one and a half times the cash it needed to meet payments. That's one reason APP never received an investment grade rating. In February, 1997, S&P rated APP notes a B+. By May 18, 1998, they were downgraded to CCC+. The ratings, in other words, were inching closer to the danger zone. ``Once a company goes into triple-C, the grade is saying, `These guys are going to default,''' says Dhileepan Parameswaran, a pulp and paper industry analyst at ratings company Fitch (Hong Kong) Ltd., which gave the company a noninvestment grade when it started rating it last year.
For a while, it seemed that the fears would prove groundless. When pulp and paper prices rebounded in the second half of 1999, APP's cash flow from operations turned positive again, and loyal investors piled in to fund the company's China expansion in 2000. APP's China card turned out to be a bad play, however. APP China Group piled up at least $2 billion in debt to build plants there. But its paper was too fancy for the market. In February, 2000, reports began circulating that crates of luxury-grade paper were mildewing under tarpaulins at APP's Ningbo (China) plant.
Investors began demanding higher yields to offset the perception of increased risk. In March, 2000, Morgan Stanley & Co. successfully underwrote a 10-year, $403 million bond for APP China Group with a 17% yield--800 basis points above any corporate dollar-denominated bond ever issued in China. APP's interest payments in the first half of 2000 alone were a staggering $378.2 million. Its ratio of cash flow to interest expense actually improved, thanks to a rise in world paper prices, but that seemed hard to sustain. ``Everybody was asking, `How can we continue to expand? We've got to be paying off our debt, not taking on new debt,''' recalls a former employee of APP in Singapore. DOWNGRADED. Borrowers played along through July, 2000, when the Widjajas offered up a 1-year, $100 million bond with a 30% interest rate, in a private placement handled by J.P. Morgan. Other investment banks, including Goldman, Sachs & Co., declined the business. That issue found takers, but the rate was an unmistakable sign that things had gone wrong. ``By mid-2000, management started losing credibility,'' says Mobius, whose firm sold its APP shares in late 2000.
The game was finally up in September. APP's attempt to refinance $1.4 billion in debt that was coming due failed after the U.S. Securities & Exchange Commission raised questions that neither APP nor the underwriter of the issue, J.P. Morgan, could answer, according to analysts and investment bankers. The prospectus stated that the Widjajas had pledged some of their 67% stake in APP as collateral against personal debts, and that if any creditor called in their loans, this ``could lead to a bankruptcy or liquidation of some or all of our companies.''
In February, 2001, the inevitable occurred. APP missed two interest payments totalling $43 million, and the company unilaterally declared a debt moratorium. Although APP has not officially declared bankruptcy, it has not made a payment on any dollar-denominated debt since. In April, S&P downgraded APP debt to ``D,'' signifying default.
APP's investors are now slogging through a cruel summer. On June 21, after three months of off-and-on negotiations with bondholders, APP agreed on the rules of engagement for future talks with bondholders, who are represented by Bingham Dana, an international law firm based in New York. The bank creditors have formed another committee, represented by the law firm Shearman & Sterling. At a Singapore proceeding last spring, one of those creditors tried to force APP into bankruptcy, but the company won a stay from the court. Out-of-court negotiations are proceeding with the bondholders. ``We have made progress, but we're not all happy,'' says Richard A. Gitlin, a partner at Bingham Dana. ``They [APP] have a lot to prove.'' APP's financial adviser in the proceedings is Credit Suisse First Boston. TOUCHSTONE. No one is alleging fraud publicly or in court. But ``the creditors are starting to ask where all the money went,'' says one securities analyst who follows the company. Three sets of auditors are now combing through APP's books: KPMG for the creditors; Arthur Andersen for APP; and Deloitte & Touche, which is investigating Widjaja derivatives contracts. The latest blow to creditors' hopes: In mid-July, an APP affiliate announced that it may be unable to retrieve deposits of $762 million from a Widjaja family-controlled bank in the Cook Islands.
The Widjajas have since moved from Singapore back to Indonesia, where they have pledged $1.9 billion in fixed assets against their $1.3 billion local debt under a government workout. The company is negotiating to sell off subsidiaries to pay its bills, with J.P. Morgan advising the company on asset sales. Meanwhile, APP's Indonesian plants are operating at 80% capacity in an industry where the break-even point is above 93%, says Peter Cain, a pulp and paper analyst at Salomon Smith Barney in Singapore.
The collateral damage from APP continues to widen. APP was billed as a great port of entry into Asian investing for American investors. Now, it is a touchstone for all that is wrong with Asian finance. ``We've lost so much money for our customers that we don't want to talk about Asian bonds anymore,'' one fund manager recently told Carson R. Cole, CEO of DebtTraders Ltd. in Hong Kong, a bond brokerage. That disintegration of confidence is a loss just as grievous as the billions sacrificed by unhappy bond investors.
The Rise and Fall of Asia Pulp & Paper OCT. 1994 Widjaja family forms APP, putting its holdings into a new public company in Singapore APR. 1995 Morgan Stanley, CSFB, and Nomura underwrite listing of APP ADRs on the New York Stock Exchange FEB. 1996 APP begins borrowing heavily in international markets JUNE 1997 Morgan Stanley is first Wall Street firm to underwrite APP debt JULY 1997 Asian financial crisis hits NOV. 1997-JULY 2000 APP borrows $4 billion in international markets MAY 1998 S&P downgrades APP to CCC+ MAR. 2000 Morgan Stanley underwrites $403 million issue for China yielding 17% JULY-SEPT. 2000 APP successfully issues $100 million in bonds with a 30% yield FEB. 2001 APP defaults on $13.4 billion in debt The Debt Bandwagon The first issuers were Asian banks. Then Wall Street got in on the act, legitimizing the overleveraged company for investors UNDERWRITER ISSUE* AMOUNT MILLIONS DATE OF DOLLARS HSBC, INDOSUEZ 2/9/96 100.0 YAMAICHI 2/22/96 349.9 PEREGRINE 6/11/96 200.0 UBS-ASIA 9/10/96 600.0 MORGAN STANLEY DEAN WITTER 6/26/97 600.0 MORGAN STANLEY 6/27/97 600.0 GOLDMAN SACHS ASIA 7/18/97 245.0 MERRILL LYNCH 11/12/97 1,250.0 MERRILL LYNCH 11/12/97 1,437.0 GOLDMAN SACHS 4/23/98 500.0 GOLDMAN SACHS 4/23/98 500.0 MORGAN STANLEY 3/9/00 403.0 J.P. MORGAN 6/29/00 100.0 * Major debt issues by APP units Data: Thomson Financial Securities Data, BusinessWeek
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The reason Golden Agri trades at a discount to its peers is that “the controlling family has some association with very poor corporate governance”, says ABN Amro’s Tiruchelvam, pointing to the storied bankruptcy of Asia Pulp & Paper. “That has been a weight on the shares.” The Sinar Mas group built one of the largest pulp and paper businesses in the region on a mountain of debt, which eventually led to the collapse of New York-listed Asia Pulp & Paper in 2001. The group’s Bank Internasional Indonesia, which had loaned large sums to related companies such as Asia Pulp & Paper, was hobbled during the Asian financial crisis and had to be recapitalised.
Amid all that, the group took its plantation arm, Golden Agri, public in Singapore in 1999. Almost a decade on, investors haven’t altogether dismissed the past corporate failures of the Widjaja family, whose net worth today is estimated at US$2.8 billion. However, the sector’s golden age, coupled with the company’s move to introduce more transparency through analyst and media briefings, appears to be starting to draw some interest back to the stock. On Feb 20, the company also carried out a one-for-two stock split to improve liquidity for retail investors.
Tiruchelvam does not cover Golden Agri but says the plantation company is a “well-managed enterprise and has a huge land bank”. OSK’s Tai, in his report on the company, reckons that “the company is too big and too significant a plantation player for investors to ignore”.
In recent months, Golden Agri has sent its management to meet with investors in the capital markets of Europe, North America and East Asia. Richard Fung, its director of investor relations, says reception has been positive and that the valuation gap between Golden Agri and its peers “is not as big as it used to be”. At end-2006, Golden Agri traded at a 62% discount to its peers. The figure is currently about 41%.
JAKARTA, Indonesia -- Asia Pulp & Paper Co. signed a $6.7 billion restructuring agreement with key creditors Thursday, but the U.S. Export-Import Bank filed a lawsuit in New York against the struggling company. APP signed a master restructuring agreement with creditors led by nine foreign-government export-credit agencies -- including those of Japan and several European nations -- and the Indonesian Bank Restructuring Agency, a government body, which is APP's largest creditor.
Creditors holding about 40% of the $6.7 billion debt -- the amount owed by APP's Indonesian companies -- signed the agreement, said IBRA Chairman Syafruddin Temenggung. APP creditors holding at least 90% of debt must vote in favor of the plan before it becomes effective under the terms of the agreement.
IBRA hopes to have sufficient creditor support for the plan by March 31, Mr. Temenggung said. "Even after we signed the agreement today we still have a tough task to convince as many creditors as possible," he said.
The agreement is the product of months of wrangling between creditors and APP, which stopped making payments on its total $13.9 billion debt over two years ago, making it one of the largest defaulters in emerging-market history. The company, which is based in Singapore but has operations in Indonesia and China, owes money to hundreds of foreign creditors ranging from the export-credit agencies to pension funds and individual bondholders.
Getting other creditors to sign up could prove difficult given widespread criticism from those not involved in the deal about what they claim to be lenient treatment of APP. Under the agreement, a third of the $6.7 billion in debt involved won't be repaid for as long as 22 years.
The U.S. Exim Bank, which until recently had been part of efforts to spearhead the talks with the other export-credit agencies, launched a lawsuit Wednesday in a New York court in a bid to recover $104 million in debt owed by APP.
"Unfortunately, we believe that the final debt restructuring proposal is not fair and equitable to APP's creditors, and its repayment structure doesn't adequately reflect APP's ability to service its debt," the Exim Bank said in a statement.
A lawyer for White & Case LLP, APP's lawyers, said in Jakarta that the firm would contact the Exim Bank in an effort to stop the lawsuit and keep Exim involved in the consensual debt restructuring.
Other creditors have been taking separate legal action. Last week, the New York State Supreme Court affirmed that three U.S. fund-management companies have legal claims on assets pledged as security for borrowings by APP's Indonesian units. The creditors who sought the ruling -- GE Capital Corp., Oaktree Capital Management LLC and Gramercy Advisors -- also want a more favorable settlement of debts owed them by the APP units. Those debts total about $250 million in principal and unpaid interest on promissory notes issued by the units and guaranteed by APP.
Still, many APP creditors have argued for an out-of-court approach to the talks, saying legal action abroad, even if successful, is unlikely to be enforceable in the Indonesian court system.
Indeed, their lack of confidence in Indonesian courts was a major factor behind the decision by foreign export-credit agencies to reach a negotiated settlement with APP instead of going to court in Indonesia. Foreign export-credit agencies, including the U.S. Exim Bank, are owed $960 million by APP, the largest combined total of any foreign creditor group. IBRA is owed slightly more than $1 billion.
Deutsche Bank AG, which launched an unsuccessful legal action in Singapore against APP last year, was among those signing Thursday, said Andrew Saker, a director at Ferrier Hodgson, an advisory firm which is working with the foreign export-credit agencies.
The German bank, which is owed $193 million by APP, and BNP Paribas SA petitioned a Singapore court in 2002 to appoint an independent management for the company during the restructuring, but the action was unsuccessful. The banks argued that Indonesia's Widjaja family, the founders of APP, should be removed from management during the restructuring.
Under the Thursday agreement, the Widjajas will continue to run day-to-day operations of the company. The family has recently drawn criticism for trying to shield their China assets from claims by creditors to other parts of the group. "The family and APP's management are committed to the consensual [debt restructuring] agreement," Franky Oesman Widjaja, an APP director, said at Thursday's signing ceremony.
Other creditors that have opposed the plan, including some private bondholders, should give their support, said Yukio Kitazume, a vice chairman of Nippon Export and Investment Insurance, Japan's government export-credit agency. APP's bond prices have been improving on the secondary market in recent weeks, showing investors expect the deal to move forward, he said.
Hon Kwok Ping is our Financial Controller responsible for our financial and accounting control functions. He served as accountant, chief accountant and company secretary in a number of international companies between 1973 and 1984. From 1984 to and 1996 he served as financial director, deputy managing director and chief operating officer in the Asian operations of European and North American companies.
From 1997 to 2003 he was the President of AgroCan Corporation. Hon Kwok Ping acted as the advisor of our company since January 2004 and was appointed Financial Controller in November 2004. He obtained his accounting professional status through the Association of International Accountant, UK. He is a Fellow of the Hong Kong Institute of Certified Public Accountants.
Past and Present Directorships Courage Marine (HK) Company Limited Fantic Ltd Agrocan Corporation John & Kent Company Ltd Agrocan (China) Inc.
Do you have something to say about him? We all know that most publications are edited many times before being released and so may not be a useful guage for a person's integrity, character e.t.c. This site seeks to uncover the REAL persona behind the facade, be it good or bad so that, Number 1, we hold them accountable. Number 2, the public can make informed decisions before investing money in their organisations. Having a good Management team is important in investing. Number 3, to know that there is still a side of them we may not know....
Courage Marine Group Limited Nil Courage Marine Holdings (BVI) Limited Courage Marine (Holdings) Co., Limited Courage Marine (HK) Company Limited Ally Marine Co. Ltd. Courage Marine Co. Ltd. Midas Shipping Navigation Corp. Zorina Navigation Corp. Courage-New Amego Shipping Corp. Raffles Marine Corp. Panamax Mars Marine Co. Ltd. Other companies Other companies New Amego Shipping Corp. Jeannie Marine Corp.
Do you have something to say about him? We all know that most publications are edited many times before being released and so may not be a useful guage for a person's integrity, character e.t.c. This site seeks to uncover the REAL persona behind the facade, be it good or bad so that, Number 1, we hold them accountable. Number 2, the public can make informed decisions before investing money in their organisations. Having a good Management team is important in investing. Number 3, to know that there is still a side of them we may not know....
Courage Marine Group Limited Nil Courage Marine Holdings (BVI) Limited Courage Marine (Holdings) Co., Limited Ally Marine Co. Ltd. Courage Marine Co. Ltd. New Hope Marine, S.A. Zorina Navigation Corp. Courage Maritime Technical Service Corp. Raffles Marine Corp. Do you have something to say about him? We all know that most publications are edited many times before being released and so may not be a useful guage for a person's integrity, character e.t.c. This site seeks to uncover the REAL persona behind the facade, be it good or bad so that, Number 1, we hold them accountable. Number 2, the public can make informed decisions before investing money in their organisations. Having a good Management team is important in investing. Number 3, to know that there is still a side of them we may not know....
Courage Marine Group Limited Nil Courage Marine Holdings (BVI) Limited Courage Marine (Holdings) Co., Limited Ally Marine Co. Ltd. Courage Marine Co. Ltd. Jeannie Marine Co. Ltd. Midas Shipping Navigation Corp. New Hope Marine, S.A. Zorina Navigation Corp. Panamax Mars Marine Co. Ltd. Raffles Marine Corp. Jeannie Marine Corp. EDI Marine Carriers Ltd. Waywiser Marine Shipping Agency Co. Ltd. Eddie Steamship Company Ltd. Olenos Navigation Company Limited Outerocean Enterprise Ltd. American Steamship Owners Mutual Protection and Indemnity Association, Inc International Chinese Executives Association French Bureau Veritas American Bureau of Shipping R.O.C. Association of Shipping Chinese National Shipowners Association North of England P&I Association
Chen Shin-Yung has more than 30 years’ experience in the shipping industry in the areas of supplies,maintenance and repairing. He was appointed to our Board on 13 April 2005. He has been Technical Director of the Company since 2001, responsible for the overall management of the maintaining of the Company’s Fleet. Chen Shin-Yung has built up good working relationships with the drydocks in Kaohsiung, Keelung, Guangzhou, Shanghai, and Qingdao.
From 1979 to 1997, he was the general manager of Bada & Company, a company specializing in ship supplies in Taiwan. From 1997 to 2001, he was the technical manager of New Amego Shipping Corp. He graduated from Datong College, Taipei, Taiwan.
Do you have something to say about him? We all know that most publications are edited many times before being released and so may not be a useful guage for a person's integrity, character e.t.c. This site seeks to uncover the REAL persona behind the facade, be it good or bad so that, Number 1, we hold them accountable. Number 2, the public can make informed decisions before investing money in their organisations. Having a good Management team is important in investing. Number 3, to know that there is still a side of them we may not know....
Chiu Chi-Shun has more than 25 years’ experience in ship design, building and maintenance. He was appointed to our Board on 13 April 2005. Since 2001, he has been the Director of Safety and Systems of the Company. In 2004, he was appointed as Managing Director of Courage Maritime, a wholly-owned subsidiary of the Company. Courage Maritime is the technical management arm of the company overseeing the technical, safety, and process compliance of the Fleet.
He began his career as an engineer in China Shipbuilding Corp., the state-owned ship building company of Taiwan, from 1976 to 1978. Between 1978 and 1983, he was a superintendent in Yang Ming Line, one of the largest shipping companies in Asia. Between 1983 and 1990, he was qualified as a marine site surveyor under the Nippon Kaiki Kyokai (“NK”) Classification of Japan. From 1990 to 1999, he was qualified as a Chief Marine Surveyor under the China Corporation Registrar of Shipping (“CR”) Classification of Taiwan. From 1996 up to now, he is the general manager of Jacksoon, a consulting firm for ship class and safety assurance. In 1994, he was voted as a director of Chinese Maritime Research Institute, which is a reputable organization engaged in the study of many key issues relating to the shipping industry.
Chiu Chi-Shun has researched and published over 20 titles of maritime reports, books, plans and manuals and has translated some 16 international publications into Chinese either from English or Japanese. He is a graduate of Naval Architecture Department of Ocean University, Taiwan.
source:IPO Prospectus Do you have something to say about him? We all know that most publications are edited many times before being released and so may not be a useful guage for a person's integrity, character e.t.c. This site seeks to uncover the REAL persona behind the facade, be it good or bad so that, Number 1, we hold them accountable. Number 2, the public can make informed decisions before investing money in their organisations. Having a good Management team is important in investing. Number 3, to know that there is still a side of them we may not know....
Telecom Asia: Singapore Telecom has done well buying assets around the region. Is that going to continue?
