LIVING up to their reputation as being among the market's most volatile, shares of Singapore-listed Indonesian pulp and paper mill firm United Fiber System yesterday crashed 17 per cent for no apparent reason.

Brokers speculated that the six-cent collapse to 30 cents for the stock - which saw a staggering 52 million units changed hands - could be because of forced selling or margin calls triggered by several weeks of sideway trading culminating in gradual weakness over the past fortnight.

Some, however, drew a tenuous link to an announcement yesterday that Unifiber is to issue 7.9 million shares valued at 35.43 cents for a total of $2.8 million as part payment of a loan from Cornell Capital Partners. Unifiber said the price is not lower than 94 per cent of the volume-weighted average price of its shares traded on Aug 16, which was 36.5 cents.

Cornell's loan to Unifiber amounts to $10 million and including the latest sum, Unifiber has repaid $6.8 million.

'Logically, Cornell has to eventually sell the shares to get back the money,' said a dealer. 'But it's more likely that those holding big positions in the stock had to bail out because of a margin squeeze.'

But Unifiber's CEO Kishore Dass dismissed market concerns over the company.

'It is business as usual,' he told BT last night.

He added that the company will proceed with the due diligence of its proposed purchase of an Indonesian pulp mill.

The company said last night it has appointed several professional parties to advise it on its proposed purchase of Indonesian pulp mill company PT Kiani Kertas.

Local law firm Rodyk & Davidson will provide advice on restructuring while another local law firm Wong Partnership will advise Unifiber on governance matters. Ernst & Young is to advise on financial and tax issues.

Every few months, Unifiber's shares undergo large-scale price moves. The most recent was on June 14 when they crashed as much as 24 per cent during morning trades, before rebounding a few days later.

This was preceded by an even bigger crash on April 18, when Unifiber collapsed a staggering 54 per cent to 23.5 cents in one day on rumours that it had lost its bid to buy an Indonesian pulp mill.

《The Business Times》