A MAJOR Indonesian bank has made a dramatic U-turn and conceded that it might suffer a loss on the US$201 million (S$329.3 million) owed to it by the bankrupt mill which Singapore firm United Fiber System (Unifiber) is eyeing.

Bank Mandiri, after insisting that any buyer of the Kiani Kertas pulp mill must settle the loan in full immediately, is now willing to consider a 'haircut' on the outstanding debts.

Bank spokesman Ekoputro Adijayanto told The Straits Times yesterday that Mandiri's top priority is to reduce its non-performing loans portfolio of over US$1 billion.

'A haircut is a likely possibility, even though it is not easy for a state-owned bank to take a haircut. We can do so, after appealing to the authorities,' he said, referring to the likelihood that part of the debts may be written off.

Mandiri is owed about US$214 million, including interest on the loan, which also had not been paid. Mr Ekoputro stressed that Mandiri wants the debts settled as soon as possible, and not by next year or in the form of instalments, as had been suggested in some media reports.

His comments followed an announcement by Unifiber on Monday that it had taken on the sales and purchase agreement between Kingsclere Finance and the mill owners led by retired general Prabowo Subianto.

On the same day, an Indonesian court acquitted Mandiri's former president-director, Mr E.C.W. Neloe, and two former directors, of corruption charges relating to a loan made by the bank to another Indonesian company.

Under the sales and purchase agreement, Unifiber will pay US$220 million to the sellers, using a mixture of cash, convertible bonds maturing 12 months after completion of the deal, and promissory notes that are to be redeemed over 33 months.

If the deal goes through, Unifiber will also pay US$11 million in cash and 70 million new shares to Kingsclere, which is controlled by Mr Wisanggeni Lauw, Unifiber's second-largest shareholder.

Mr Ekoputro insisted that, as the biggest secured lender to the distressed pulp mill, Mandiri 'has the right to set the tone of negotiations'. He also emphasised that Unifiber is not the only party negotiating to buy Kiani Kertas.

'We have a number of bidders who are interested. Whichever party comes up with a real proposal and has its deal approved, that will be the final one for us.'

Last month, Indonesian billionaire Putra Sampoerna withdrew his bid to buy Kiani Kertas after failing to agree on the purchase terms with Mandiri. This left Unifiber as the only suitor publicly in the running.

Mr Ekoputro explained the bank's previous opposition to Unifiber's bid: 'We are basically complaining that they don't talk to us directly. They are negotiating their deal through the press, instead of coming to us directly.'

But Unifiber chief executive Kishore Dass said yesterday that he viewed Mandiri's willingness to take a haircut on its Kiani Kertas loan as a 'positive step in the right direction'.

And talks with creditors, including Mandiri, will take place only after Unifiber gets clearance from investors and the Singapore Exchange, he added.

ANZ Singapore has replaced Deutsche Bank as the financial adviser for the proposed acquisition, while US investment bank Merrill Lynch is believed to be arranging the financing for the deal.

《The Straits Times》