Sinar Mas - Widjaja

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

The Widjaja Family History

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

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

Franky Oesman Widjaja - Legacy hangover

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%.

Franky Oesman Widjaja - History with Asia Pulp & Paper Co

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.