Asia Pulp & Paper 

Asia Food & Properties

Sinar Mas

Bund Centre

Dynastic wealth - WIDJAJA's 

Eka Tjipta Widjaja started out selling biscuits from a bicycle rickshaw in the late 1930s. He survived wars, a revolution and a white-knuckle economic plunge to create one of Southeast Asia's largest business empires.

But then Asia Pulp & Paper  Co., the cornerstone of the Widjaja family empire and the 10th-largest paper company in the world, ran into severe debt trouble in 2001. Many thought the clan's days among Asia's corporate elite were numbered.

Creditors wanted repayment of APP's $13.9 billion debt. They accused the family of shifting hundreds of millions of dollars from the business into offshore accounts. Indonesian regulators seized the family-run bank, cutting off a crucial source of funds. APP's shares were kicked off the New York Stock Exchange after their value plunged to almost nothing. Environmentalists decried the papermaker's destruction of Indonesian rain forests.

Two years later, however, the Widjajas (pronounced WEE-JAI-YAHS) remain firmly in control of APP, despite being embroiled in what experts regard as the biggest and most complex corporate-debt workout in emerging-markets history. They have deflected efforts to reduce their control over APP -- including a highly unusual appeal to Indonesia's president by the U.S. and other governments -- and they are pushing ahead with an ambitious expansion in China. Meanwhile, most of APP's creditors, including almost every major international bank, many pension funds and the U.S. government, for two years haven't seen a dime of what the company owes them.

Indonesia has spent five years trying to root out the collusion between business and government that flourished under former President Suharto.   But the Widjaja family's ability to remain at the helm of APP illustrates how much influence business interests continue to have on government policy. It also underscores how defenseless foreign creditors can be in Indonesia's legal system. Judges here routinely refuse to declare powerful local companies bankrupt, no matter how bad their financial state.

APP officials deny that they have siphoned money or done anything else illegal in their business dealings. "You can be suspicious of anything. Of course, nobody's perfect," Indra Widjaja, the family's chief negotiator in the restructuring talks, says in an interview. If any mistakes were made, he says they weren't intentional.

He adds that the family is committed to repaying its debt and promises that creditors will benefit once the company returns to its expansionary ways. "We can grow so high. We can buy out our competitors. That's our past record," he says.

The Indonesian government, APP's largest single creditor, has played the most important role in the Widjajas' resilience. It has repeatedly sided with the family against other large creditors who have lobbied for outside scrutiny of APP's cash flow and management.

Frustrated lenders say the debt saga also holds a warning for Indonesia: Foreign investors may start to shun the country if the government doesn't force APP to give its creditors a better deal. The ambassadors to Indonesia from the U.S., Japan, Canada and eight European countries wrote in a March letter to President Megawati Sukarnoputri that "failure to reasonably satisfy the creditors of APP will affect the confidence of future potential investors into Indonesia."

Indonesia can ill afford to scare off investors. The country already suffers from image problems in the wake of the October bombings on the resort island of Bali and this month's terrorist attack on the J.W. Marriott Hotel in Jakarta.

Despite the claims of favoritism, the government agency handling the debt workout says that it hasn't been influenced to cut the family some slack. The Indonesian Bank Restructuring Agency, which has quasijudicial powers, says it is trying to finish up a restructuring deal that will maintain APP as a healthy employer in the pulp-and-paper industry in Indonesia. APP and its various subsidiaries employ about 60,000 Indonesians.

Patriarch Eka Tjipta Widjaja emigrated to Indonesia's island of Sulawesi from China's Fujian province at the age of nine. A swashbuckling trader known for wearing a belt buckle that spells out his first name, "Eka," in diamonds, Mr. Widjaja survived several spectacular collapses along the way to becoming one of Indonesia's wealthiest businessmen. During World War II, Japanese price controls wiped out his palm-oil business. When Indonesia's war for independence against the Dutch crushed his commodity-trading business in 1949, he sold family jewelry to repay creditors and traded in his car for a bicycle. He rebuilt by forging close ties with Indonesia's military, selling food and other supplies to troops on remote islands in eastern Indonesia.

Today, the family's businesses extend from India to China and range from palm oil to real estate to financial services, as well as paper and pulp. Now 82 and living primarily in Singapore, Mr. Widjaja has turned over day-to-day control of his businesses to his extensive family and doesn't give interviews. His eldest son, Teguh Ganda Widjaja, runs APP and the other pulp-and-paper businesses; Indra Widjaja, another son, looks after financial matters.

The business empire was put in jeopardy, though, when the family launched a major expansion during the 1990s in an attempt to build APP into the world's biggest papermaker. The drive was fueled by billions of dollars borrowed from private banks, pension funds and the U.S. and other governments.

Since APP's products -- mainly writing and tissue paper, as well as pulp -- are priced in dollars, the company was able to continue borrowing even through the 1997 Asian financial crisis. While many Asian companies were forced to default on their foreign debt when their local currencies collapsed, APP benefited because its raw materials became much cheaper, while revenue was unaffected. Crunch time came in 2001, when a sharp drop in global pulp prices devastated cash flow and forced the company to declare a standstill on most debt repayments.

For creditors trying to get their money back, part of the problem is that APP hasn't presented an audited financial statement since one released in 2000 for the 1999 calendar year. Although some of its subsidiaries continue to report results, APP says it is no longer required to present audited, consolidated statements because it was delisted from the NYSE in July 2001.

But some of the financial details that have come to light have raised creditors' suspicions about APP. In a July 2001 meeting with creditors, APP disclosed that five trading companies in the British Virgin Islands owed APP's Indonesian subsidiaries nearly $1 billion.

At the time, APP said those companies weren't related to the group or to the Widjaja family. But The Wall Street Journal learned that several APP employees worked at those companies as officers or agents.   Creditors alleged, in meetings with the company and with officials of the Indonesian Bank Restructuring Agency, that APP never intended to collect the money, and that the transfers were a way to keep money away from creditors. APP says it always intended to collect the money and says it has launched legal proceedings in Indonesia to collect.

Indra Widjaja says the episode was a teething problem. "All this occurred because we went too fast," he says. "The first few months are trial and error."

Also in 2001, an outside auditor found that one of APP's Indonesian subsidiaries, Indah Kiat, had nearly $200 million on deposit with a private bank controlled by the Widjaja family in the Cook Islands at a time when the company's finances were fast deteriorating. Two other Singapore-listed Widjaja family companies that aren't part of APP also placed several hundred million dollars in the same bank, BII Bank Ltd. It later turned out that none of the money could be withdrawn immediately because BII Bank had lent it to other Widjaja family projects, company officials said.

Creditors charged in meetings with officials from APP and the government restructuring agency that APP was using the bank to hide funds from them. Indra Widjaja says Indah Kiat has since recovered its money, and the other units will get theirs back in a few years. Creditors to Indah Kiat, however, say they haven't received any of those funds.

Some creditors aren't satisfied by the company's explanations. Deutsche Bank AG, owed $193 million by APP, believes a fair outcome to debt talks is impossible with the Widjajas running things and the Indonesian Bank Restructuring Agency leading the way. Last August, the German bank and France's BNP Paribas SA petitioned a court in Singapore, APP's corporate home, to strip the family of control and appoint an administrator to manage the company.

"The incumbent management is probably corrupt and wants to hold on to the cash flow so more of it can leak out," Alvin Yeo, Deutsche Bank's attorney, said in a recent court hearing. The Widjaja family, he added, has been "treating their own companies as family piggy banks."

The court rejected the bank's petition. But it also said that if consensual debt restructuring remains stalled or if what the court described as "questionable transactions" continued, the appointment of judicial managers can't be ruled out in the future. The court wasn't more specific. Other creditors are weighing their alternatives -- including further legal action.

Some creditors had hoped the government restructuring agency would force the Widjajas to make a settlement more favorable to the creditors. Instead, the agency has consistently accepted the family's argument that management shake-ups or closing companies could jeopardize jobs.

The agency has signed a preliminary agreement with APP covering the debts of its Indonesian operations, which amount to $6.7 billion out of APP's total debt of $13.9 billion. The plan would split the $6.7 billion into three segments. Only the first, of $1.2 billion, would be fully repaid, and that over 10 years. The rest would be refinanced or exchanged for convertible bonds. The APP debt held by creditors who have agreed to the plan amounts to 40% of the company's Indonesian debt, but the plan needs to be supported by 67% to become binding.

The Widjajas say the plan should be implemented as soon as possible. "There's no reason for creditors to be against this deal, unless they just want to make trouble," Indra Widjaja says.

But some creditors believe APP can fully repay much more debt than it will do under the plan. They wanted the proposal to include measures that would have made it more difficult to transfer money out of APP to other companies controlled by the family. In addition, creditors wanted the family to put its shareholdings into a special trust that would automatically transfer ownership to creditors if APP defaults after the deal takes effect.

The Widjajas maintained that those plans were contrary to Indonesian law, however, and the restructuring agency refused to consider them. Creditors presented several Indonesian legal experts who disagreed, but the agency wasn't persuaded.

Many creditors believe they will eventually be forced to accept the deal, because the stance of Indonesia's government and the lack of recourse through its legal system effectively leaves them with little choice.

Not all APP creditors have been shut out. The company paid Chinese banks about $700 million in the first year after APP declared a standstill on debt payments in March 2001, APP attorney Ferry Djongianto testified in the Deutsche Bank case. Indeed, people with knowledge of the situation say APP has stayed current on all debt payments to Chinese banks.

Indra Widjaja says APP can keep current on its debt to Chinese lenders because it has cash flow from its Chinese operations and can devote that money to repayment. There's another incentive: In China, state-run banks have extensive authority to seize assets in the event of a default.

In late September, APP China agreed with the Chinese province of Yunnan to build a huge new pulp-and-paper plant for $2 billion, according to an official directing the project for the provincial government. The official said APP has agreed to finance 80% of the project. APP also resumed construction recently of a planned $1.6 billion paper plant in Hainan province's Yangpu Economic Development Zone.

The cash fueling APP's expansion comes from Indonesia's trees. APP's mill in the central Sumatra town of Perawang gobbled up an estimated 60 million of them last year alone, environmentalists estimate -- or an area, at about 260 square miles, slightly larger than Tokyo.

Two decades ago, the region around that mill contained some of Indonesia's densest rain forests. Today, broad vistas stretch for miles across land cleared for palm-oil plantations and other agricultural use. Habitats for the region's many endangered species, such as the Sumatran tiger, are vanishing.

The scene is especially grim in the Tesso Nilo reserve, a protected forest that the government has designated as off-limits to loggers and that has twice the bio-diversity of similar areas in the Amazon basin. Along the red-dirt roads, bare-chested laborers load felled logs onto trucks.

Scientists from the World Wildlife Fund estimate the forest will disappear within the next five years due to logging. In 2002, the fund followed several trucks carrying logs from the forest to the mill gates, and presented that evidence to the company and forestry officials. No action was taken.

Residents of Tesso Nilo say many of the trees cut from the protected forests nearby are sent to the APP mill, a practice they know is illegal but continue because it pays. "I can't stop my people," says Mohammad Hadta, a 41-year-old village elder, who reels off the names of nine local companies he says employ locals to cut down trees and deliver the wood to APP's mill and other mills in the area. "If the mills stopped buying the wood, we would stop selling it."

APP says it checks the documents of every truck that arrives at its mill; such papers show that the company has the right to chop down trees in nearby areas. However, the company has no way of telling whether the logs on the truck actually came from those areas, or a protected area such as Tesso Nilo. "There is not too much we can do. They come to us with legal documents," says Steve Shih, the mill's senior director for forestry.    - 2003 August 15    WALL ST. JOURNAL   by Timothy Mapes

AFP hiving off China property business

Food & Properties (AFP), controlled by Indonesia's Widjaja family, is proposing hiving off its China commercial property business - and placing that under a new wholly owned subsidiary, Bund Center Investment Ltd, which it proposes to list on the Singapore Exchange (SGX).

This, so that the group can 'build on its position as a leading developer in premium commercial, residential and township property developments in its selected markets' - by devoting greater and separate attention to the two key markets of South-east Asia and China.

AFP said yesterday the proposed demerger will be effected through a capital reduction in the company and a distribution in specie of all the shares in Bund Center to AFP shareholders.

Shareholders will, immediately after the distribution, continue to hold their ordinary shares in AFP (which will remain listed on SGX) as well as hold ordinary shares in Bund Center. This means shareholders will be able to individually and directly participate in the ownership of, and enjoy returns from, shares held in two separately listed companies without any additional cash outlay.

AFP will not have any shareholding interest in Bund Center immediately after the distribution.

The news, which was released during the mid-day break, sent AFP shares soaring. They closed 25 cents up at 65 cents - a gain of 62 per cent - on volumes totalling almost 12 million shares, yesterday.

The demerger will result in AFP becoming a South-east Asian-centric property company, focusing its resources on its existing property businesses in Indonesia, Malaysia and Singapore. It will also continue to engage in all its existing food businesses.

Bund Center will then be a China-centric property company, holding just about all of AFP's property investments in China - which comprise the Bund Center located in Shanghai and the Golden Center located in Ningbo.

Bund Center is currently involved in property investment, and could expand into property development in China, in the future, AFP said yesterday.

AFP will, however, hold on to interests in selected mixed developments located in Chengdu and Shenyang in China, as well as land use rights to several pieces of vacant land located in Zhuhai in China, as it intends to sell these off.

Explaining the demerger, AFP said yesterday: 'Each geographical segment is subject to its own unique market and competitive conditions resulting in operations that are independent and distinct from each other.'

It believes the move will enable the group to achieve operational independence for each business and allow the management of each property business to better address the operational issues and execute the distinctive strategies needed to operate more efficiently and effectively.

'As such, the board is of the view that the demerger will assist shareholders, the financial community and the investing public to better appraise the value of the respective underlying businesses and assets of the Proforma AFP Group and the Bund Center Group and, consequently, allow for the value of such businesses and assets to be better reflected in their respective share prices,' it said.

The demerger is subject to shareholders' approval and various regulatory approvals and authorisations.  - 2009 September 25   BUSINESS TIMES

Widjaja Family Princeling

Singapore Business Times ran this article with title as " Equally at ease at Nassim or Chomp Chomp"!

Hano Maeloa is just at ease sipping fine wine in his house at Nassim Road as eating at hawker centres. His favourite hawker food is carrot cake at Chomp Chomp in Serangoon Gardens.

Mr Maeloa: Estimates that he could have invested about $20-30 million in his wine collection of about 8,000-10,000 bottles

His most expensive wine investment is a Romanee-Conti magnum, which he had bought from a London merchant about 10 years ago for $50,000. All in, he estimates that he could have invested about $20-30 million in his wine collection of about 8,000-10,000 bottles housed in the 2,000-square-foot cellar in the basement of his residence at Nassim Road.

Mr Maeloa, his homemaker wife and their three school-going children, along with his mother, Sukmawati Widjaja (of the family that controls the Sinar Mas group in Indonesia), and his sister live in the bungalow.

The family developed the house on a site of about 40,000 sq ft which Madam Sukma purchased in 2006 from Peter Kwee. The house was designed by local architect Timothy Seow and the interiors were done by Hirsch Bedner Associates, Mr Maeloa says.

Perhaps Mr Maeloa's ease at fitting into both ends of the lifestyle spectrum may have to do with his having spent some of his early years here.

He did his entire primary school education at Catholic High (in Queen Street) followed by a few years at Whitley Secondary School (at Dunearn Road) - before moving to Boston for prep school. He holds a BSc in business administration from the University of Southern California.

Mr Maeloa used to run an IT fund in Los Angeles around the time of the Internet bubble, and when the bubble burst, he returned to Singapore in 2001 and set up a shipping business to coordinate the logistics requirements of the Sinar Mas group.

Around 2007, he sold the shipping business and invested in Top Global in Singapore, but failed to gain control of the company. He soon sold off his interest in Top Global but stayed on as an executive director.

His mother arrived on the scene a few years later, taking up a placement issue by Top Global in early 2010. She later made a general offer and also participated in Top Global's rights issue last year. Her stake is slightly over 50 per cent.

'My passion has always been in property,' declares Mr Maeloa, in an interview with BT on his 42nd birthday. Both Madam Sukma and Mr Maeloa are Singapore citizens now.

As a student of Whitley Secondary School, he excelled in badminton, winning trophies in interschool tournaments. These days, his hobbies include travelling with his family to ski resorts and hot springs in Japan, and touring the US and Europe. 'When I'm overseas, I like to visit places with unique architecture.'

In Singapore, he visits showflats of other developers in his free time. 'I like looking at how people do wonders with just a square space and sometimes small units.' Mr Maeloa is the only son and the eldest of four children of Madam Sukma.   - 2011 February 8   SINGAPORE BUSINESS TIMES


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