UNITED Fiber System (UFS) yesterday announced the resignation of Kishore Dass as executive director and chief executive officer - an unexpected development that could cast more uncertainty on the company's proposal to acquire a bankrupt Indonesian pulp mill.

　　Company chairman Sven Gosta Thordsson Edstrom has been appointed acting CEO with immediate effect. UFS said Mr Dass resigned for personal reasons. He had been the driving force behind UFS's difficult bid to buy pulp mill Kiani Kertas, an acquisition yet to be completed.

　　In February, UFS said it had taken over an agreement signed between Kingsclere, controlled by UFS's second-largest shareholder Wisanggeni Lauw, and the mill's owners, led by Prabowo Subianto, a retired general.

　　Under the terms of the agreement, UFS will pay US$220 million to buy the mill, using a mixture of cash, convertible bonds, and promissory notes. UFS will also take over Kiani's debts, including a US$201 million loan, plus US$13 million interest, owed to its biggest creditor, Bank Mandiri.

　　But shortly after the announcement, the Financial Times reported that Merrill Lynch had decided against funding UFS's bid to buy the pulp mill, after both JP Morgan and Deutsche Bank had turned down the company.

　　This prompted UFS to issue a statement saying that it had lined up the necessary funding. It said it had engaged Merrill Lynch to assist in arranging the financing, although the US bank would not provide the funding itself.

　　'The company will make necessary announcements at the appropriate time when the funding of the acquisition has been finalised,' UFS added.

　　So far, however, no such announcement has been made.

　　Kiani Kertas was previously controlled by Bob Hasan, once a prominent businessman and close friend of former Indonesian president Suharto. An earlier bid for the mill by UFS was rejected by Bank Mandiri, but the company found itself in the running again when Indonesia's Sampoerna family withdrew its bid to buy Kiani Kertas because it could not come to terms with the bank.

　　Mr Dass had said previously that UFS was pursuing the acquisition of Kiani Kertas, despite all the complications, because the facility would give the company an operationally ready pulp mill and a new revenue stream.

　　UFS was created out of a reverse takeover of construction company Poh Lian Holdings, with a switch in core business from construction to forestry and pulp production.

《The Business Times》