FORESTRY-RELATED group United Fiber System (Unifiber) is being held hostage by growing market confusion over the status of its plans to buy a pulp mill in East Kalimantan, market-watchers say.

　　But its chief executive, Mr Kishore Dass, remains adamant that a bidding group which includes Unifiber has an iron-clad deal to acquire the distressed pulp mill Kiani Kertas.

　　'What we have now is an iron-clad, legally-binding document signed by Kingsclere Finance and Kiani's owners, Fayola Investments,' he told The Straits Times yesterday.

　　The 'exclusive sales and purchase agreement' was signed on Dec 1 by Fayola, a privately held vehicle owned by retired general Prabowo Subianto, and Kingsclere, owned by Mr Wisanggeni Lauw, who is also Unifiber's second-largest shareholder.

　　Kingsclere in June last year signed a letter of intent with Unifiber, which will buy Kiani in a 'back-to-back' transaction.

　　Confusion over the deal has arisen in recent weeks after conflicting media reports said that Kiani's single-largest creditor, Bank Mandiri, had rejected the bid from the Unifiber group.

　　Mandiri's corporate secretary, Mr Ekoputro Adijayanto, was quoted by Bloomberg News on Thursday as saying the proposal submitted by the consortium had failed to meet the lender's criteria.

　　Mr Adijayanto also told Bloomberg that Mandiri, which is owed US$201 million (S$330 million) by Kiani, had chosen to back the bid by the Sampoerna Group, which is flush with cash after selling its cigarette business last year.

　　Sampoerna was reported by Indonesian media to have made a competing US$401 million bid for Kiani last year, of which US$300 million has already been deposited into an account with Mandiri.

　　Some light was cast on the picture yesterday after another Mandiri official was quoted as saying that what was rejected by Mandiri was, in fact, an informal debt repayment proposal by the Unifiber group, and not its bid to buy Kiani.

　　Mandiri's corporate banking director, Mr Abdul Rahman, told Indonesian magazine Tempo that Unifiber had failed to give a clear picture about its plans to repay Mandiri's debt, which led to the bank's rejection.

　　He also said that Unifiber's proposed repayment scheme did not meet Mandiri's requirements - that any investor keen to buy Kiani should be able to reduce the pulp mill's debt ratio by 23.4 per cent.

　　Details of the informal repayment offer made by Unifiber was not disclosed.

　　'Should Unifiber submit a new bid, Mandiri would process it in accordance with our procedures. A decision would then be made by a special committee,' Mr Rahman was quoted as saying.

　　The latest revelation comes a day after Unifiber issued a statement on Thursday to calm investors' concerns, saying that it has 'lined up the necessary funding' to buy Kiani and to refinance the pulp mill's existing creditors.

　　But some observers said that its failure to disclose the exact figures and the source as well as the structure of the funding had created more ambiguity and confusion over the state of the deal.

　　Perplexed investors yesterday voted with their feet, opting to offload their Unifiber holdings in a big way.

　　The counter, which resumed trading yesterday after a three-day suspension, plunged 18 per cent to a three-month low of 25 cents apiece, before recovering partially to close at 26.5 cents.

　　It was also the second most actively traded counter with about 52.8 million shares changing hands.

　　Unifiber also said on Thursday it is now in an 'advanced stage of negotiations' with Kingsclere for the transfer of Kiani's sales and purchase agreement to Unifiber.

　　It added that it will engage Mandiri in 'ongoing discussions' and will take necessary steps to fully finance the lender's debt by March.

《The Straits Times》