The staying power of the Widjajas

The following news articles concerns the wrestle for control over a coal mining company in Indonesia but these powerful players are familiar movers and shakers of the palm oil industry, too.

The commodities market is inter-related, be it for a kitchen staple or to generate electricity.

Widjaja clan seeking acquisition support in Singapore
29 May 2015
SINGAPORE: (Bloomberg) Indonesian billionaire Eka Tjipta Widjaja is getting support from Singapore financiers to fund expansion as he bids for a London-listed mining company.

A reverse takeover last month created the family's fifth Singapore-listed company, coal miner Golden Energy & Resources Ltd, while palm-oil producer Golden Agri-Resources Ltd tapped the city's bond market twice in the past five weeks. 

Widjaja's also seeking control of Asia Resource Minerals Plc (ARMs), a route to becoming one of the top four coal producers in his home country.

Investors have funded the five Singapore entities with S$4.3 billion of loans and bonds to help Widjaja build an empire with a market value of US$7.5 billion on the city's stock exchange, data compiled by Bloomberg show. 

Widjaja's latest ambitions and the backing he's winning from investors show how far the 91 year-old has rebounded from the US$13.9 billion Asia Pulp & Paper Ltd default in 2001.

"It was interesting to see how they scraped through without having to dismantle their business," said Robert Appleby, co-founder of Asia Debt Management Hong Kong Ltd, which was a creditor in the APP debt restructuring. 

"The people with the longest staying power ended up on top. So today, as the manifestation of that, you have the Widjajas once more, a generation has moved on and their offspring largely driving their second coming."

The ARMs bid is being undertaken by the family's Sinarmas group via its Asia Coal Energy Ventures Ltd vehicle, which was vying with UK banking scion Nathaniel Rothschild until the financier abandoned his plan last week.

Sinarmas is targeting ARMS to gain control of its 85 per cent of PT Berau Coal Energy, Indonesia's fifth-largest coal miner. A successful deal would be a boon for the family's Golden Energy unit, headed by the tycoon's 33-year-old grandson, who has said the companies could combine to become one of Indonesia's four biggest producers.

Berau would come with some big challenges. The miner's bondholders have watched their investments halve in value over the last year amid boardroom spats and tumbling coal prices. It must repay a US$450 million bond due July 8 and ARMS said in March that there wasn't enough cash for noteholders.

"Sinarmas is the best chance for Berau to recover and pay off the almost $1 billion in debt," Fuganto Widjaja, who oversees the family's energy and infrastructure business and heads Golden Energy, said in a May 13th e-mail.

Berau also has until March 2017 to repay US$500 million of 7.25 per cent notes. The distressed notes have started to rebound this month, climbing from 51.6 cents in the dollar at the end of April to 57.7 cents on Friday at 9:38 am in Singapore. Its 12.5 per cent bonds due 2015 have climbed 6.1 cents to 60.9.

In March 2001, Asia Pulp & Paper halted payments on US$13.9 billion owed to creditors following a plunge in global paper prices. 

The default, coming in the wake of the Asian financial crisis, included about US$6.7 billion of US dollar bonds, the biggest missed obligation by an Asian company to date. The resulting debt settlement stretched out for at least 15 years.

"The restructuring is going on according to schedule. Some have been repaid, especially those under Indonesian operating companies," Gandi Sulistiyanto, Sinarmas's managing director in Jakarta, said by phone on Wednesday. "So far so good." 

Sulistiyanto wasn't available to comment further on the group's Singapore plans on Thursday.

Sinarmas's energy ambitions coincide with Indonesian president Joko Widodo's plan to build plants with a combined capacity of 35,000 megawatts of electricity over the next five years to power an economy suffering the slowest growth since 2009.

Widjaja's listed entities in Singapore and at least 10 others in Jakarta had a combined market value of about US$17 billion on Wednesday, according to data compiled by Bloomberg. That compared with about US$15.5 billion at the end of 2010.

"Singapore is an excellent capital market for them to raise money from, which is probably what they had in mind when the five entities built their presence here," said Nirgunan Tiruchelvam, who follows Golden Agri as an analyst in Singapore at Religare Capital Markets. 

"To their credit, they have put the APP episode behind them." In addition to the palm-oil producer and Golden Energy, the other companies listed in Singapore comprise Sinarmas Land Ltd, Indonesia's largest developer, Bund Center Investment Ltd and Top Global Ltd, run by Widjaja's daughter Sukmawati.

Golden Agri returned to the Singapore market on May 19 to ask investors to buy more of its 2018 bonds. It sold S$75 million worth of the notes, after getting 40 per cent more orders than it sought in the initial S$125 million sale on April 21.

"As a survivor, I'm very conscious - not just with the Widjajas but with everyone - of the debt-carrying capacity of companies," said Asia Debt Management's Appleby. "If they have the cash flow that can service debt and generally are minded to service that debt, then it's probably good enough."


22 May 2015
Ousted CEO digs in at Asia Resource Minerals
By John Aglionby for Financial Times

SINGAPORE: It has all the elements of a corporate thriller. An ousted chief executive occupies the company’s headquarters, takes control of the IT systems and bank accounts, and hires 100-plus guards to prevent him and his supporters from being evicted while he sues his former bosses for engineering his removal.

Events on the 15th floor of a Jakarta skyscraper in the offices of Berau Coal Energy — where Amir Sambodo, former chief executive of parent company Asia Resource Minerals is holed up — took a new twist on Friday.

Share trading was suspended in Asia Resource, after it admitted that it had failed to regain “control over the company’s procedures, systems and controls” in relation to Berau.

Asia Resource owns 85 per cent of Berau, Indonesia’s fifth-largest coal miner whose shares were suspended earlier this month.

The developments are the latest in a five-year multi-billion pound battle that pits British financier Nathaniel Rothschild, scion of the legendary banking dynasty, against two of the southeast Asian country’s richest and most powerful families.

Asia Resource was formed in 2010 as an alliance between Rothschild and Indonesia’s Bakrie family. Originally called Bumi, it brought together the bountiful natural resources of Southeast Asia with the financial heft of the City of London.

But the shares have declined sharply in recent years — falling from a high of £14 in 2011 to just 3.6p last December amid a series of public spats over corporate governance and company strategy, combined with a slump in coal prices.

The Bakries were bought out in March 2014 and the company’s name changed to Asia Resource Minerals. But the troubles continued as the London-based executives remained unable to stamp their authority on the Indonesian subsidiary.

The share price has since recovered to 36.75p as both Rothschild — now in alliance with Russia’s Suek coal group — and a consortium involving another prominent Indonesian family, the Widjajas, made separate offers to buy the company.

Rothschild has since withdrawn his offer but said he would still underwrite a US$100m recapitalisation that could see him take majority control of the struggling miner. A condition of the Indonesian consortium’s offer is that investors reject Mr Rothschild’s recapitalisation plan.

Hopes of a peaceful resolution have been dashed, not least by the antics of Sambodo, who was appointed chief executive of Asia Resource and Berau in 2014.

He stepped down from both posts in March as the UK’s Financial Conduct Authority said the company had committed “serious breaches” of numerous rules. But he then claimed the emergency general meeting called to confirm his replacement was organised improperly and that he was still the legitimate boss.

Negotiations between the Asia Resource management and the executive failed to resolve the impasse. Sambodo filed a lawsuit against his former employers over his removal and on Wednesday the London-listed company acknowledged that he had occupied the office and was denying access to two senior western mangers.

On Friday, Asia Resource admitted further defeat and said it had no choice but to request a suspension of its shares.

It has begun High Court proceedings in London against Sambodo over alleged breaches of “various agreements” following his resignations. It is claiming damages against him.

People familiar with the matter say they hope the situation with Sambodo will be resolved on Monday. Seasoned watchers of the saga predict the thriller is far from its climax.

12 May 2015
Rothschild vs. Widjaja: Super-rich Battle Over Indonesia Coal Mine

HONG KONG — (Wall Street Journal) A battle between members of wealthy families from opposite sides of the world over an Indonesian coal miner on the verge of default will come to a head this week, the latest act in the drama surrounding London-listed Asia Resource Minerals PLC.

Leading the cast list of the superrich involved in the increasingly bitter struggle is 43-year old British financier Nathaniel Rothschild, scion of the famous banking family, who is hoping to win back control of the company he first brought to the London market five years ago.

Asia Resource’s shareholders will vote Thursday on Rothschild’s proposal to inject US$100 million into the company by underwriting a share issue that could take his stake in the company to around 60% from 17.5% now. 

Rothschild plans to pay off some of the company’s debt and restructure the rest by extending maturities and modifying the bonds’ interest rates.

Rothschild’s opponents are the billionaire Widjaja family, which doesn’t own a stake in Asia Resource but is hoping to keep its mines in Indonesian hands at a time of rising resource nationalism there, even as a plunge in coal prices in recent years that has prompted a nosedive in the value of the unprofitable company.

The Widjaja family’s efforts are spearheaded by 33-year old Fuganto Widjaja, grandson of family patriarch Eka Tjipta Widjaja, in partnership with hedge fund Argyle Street Management, a 4.7% shareholder in Asia Resource.

The Widjaja family’s Sinarmas Group, along with Argyle, last week confirmed a rival plan that involves funneling US$150 million into Asia Resource via a specially formed investment vehicle, Asia Coal Energy. It says it will restructure the company’s debt in a way similar to that of Rothschild.

With Rothschild barred from voting his shares on Thursday, only half of the 83% of remaining shareholders are needed to derail his plan.

A spokesman for Rothschild said he welcomed the bid from the Widjaja family, saying the competition for Asia Resource would benefit shareholders.

For both sides, the prize is Asia Resource’s 85% investment in PT Berau Coal Energy, Indonesia’s fifth-largest coal producer and owner of three mining sites in East Kalimantan.

Watching on are Asia Resource’s bondholders, who have collectively lent nearly US$1 billion to the company. With its cash flow dwindling, the miner will likely default on US$450 million of that debt due in July without a restructuring, analysts say.

Supporting characters include one of Russia’s wealthiest billionaires, Andrey Melnichenko, whose SUEK PLC could team up with Rothschild to bid for Asia Resource if his recapitalization plan succeeds. SUEK doesn’t currently own a stake in Asia Resource.

Meanwhile, advising the Widjajas is Ian Hannam, a former star banker with J.P. Morgan Chase & Co. who left the bank in 2012 following a breach of insider-trading rules. Hannam first suggested investing in Indonesian coal to Rothschild.

Both sides are haunted by history.

The Widjaja family was involved in the largest-ever Asian corporate default when its Asia Pulp & Paper defaulted on nearly US$14 billion of bonds and loans in 2001 in the wake of the Asian financial crisis.

That background is causing concern for Asia Resource’s bondholders, including Ashmore Investment Management, Pioneer Investment Management and Insight Investment Management. All three have stakes in the default-threatened July note. Spokespeople for the funds declined to comment.

“Bondholders clearly prefer Rothschild, with decent corporate governance, over an Indonesian solution where you don’t know how things are going to play out,” said a person with close knowledge of the debt-restructuring negotiations.

Fuganto Widjaja said his family’s history was irrelevant.

“I’m 33. If I default on US$1 billion, how am I going to be the steward of a US$20 billion Sinarmas Group company when I’m 43 or 53?” Widjaja said in an interview. 

“Equating the Asian financial crisis, which brought down countries, to a coal company that can be nursed back to health, is pretty far out.”

Asia Resource—then known as Bumi PLC—was founded by Rothschild in 2011 in partnership with the Bakries, another wealthy Indonesian family, who owned nearly half the company. 

Rothschild soon became embroiled in bitter disputes with the Bakries over accounting irregularities, and resigned from the company’s board in 2012.

The Bakries later split from Bumi in 2014, selling their 47.6% holding in installments to Samin Tan, the company’s then-chairman.

Last week, the Widjaja camp said it had agreed to spend US$120 million to purchase loans made by Raiffeisen Bank International AG to entities controlled by Tan. Since Tan has defaulted on those loans, Raiffeisen has gained control 23.8% of the voting rights in Asia Resource, which Tan had provided as collateral.

Raiffeisen declined to comment on the deal, citing confidentiality issues. Other Asia Resource shareholders contacted by The Wall Street Journal also declined to comment.

6 May 2015

SINGAPORE: (Financial Times) -- Asia Resource Minerals, the Indonesian coal group formerly known as Bumi and co-founded by British financier Nathaniel Rothschild, has received a 41p a share offer from an Asian consortium including Indonesia's wealthy Widjaja family, who argue the company needs a local owner.

The £99m offer, which is funded by the Widjaja's Sinarmas conglomerate and also involves Hong Kong hedge fund Argyle Street Management, competes with a US$100m recapitalisation plan put forward by Rothschild.

This is the latest twist in a dramatic saga between the well-connected British financier and the dominant clans of a country that, while rich in economic potential and natural resources, can be extremely hostile to foreign business owners.

Rothschild is still struggling for control of the company after he unwound his alliance with Bumi co-founders the Bakrie family, a powerful Indonesian political and business dynasty whom he fell out with acrimoniously. 

At one point, Rothschild took to Twitter to insult them, calling the group's chairman an "evil genius" and labelling his son, Aga Bakrie, "dumb".

The Widjaja's offer comes with an equity injection worth US$150m, their bidding vehicle, Asia Coal Energy, said in a regulatory statement.

It also said the 41p a share price represented a 173 per cent premium to their April 13 close, and a 198 per cent premium to their 30 day moving average.

The Asian consortium are also seeking a restructuring of ARM's debt.

In their statement, they claimed that the coal miner was being run in a "sub optimal fashion" and needs an established Indonesian partner.

The Widjaja family, who are known for their close links to former Indonesian strongman Suharto's family, founded Asia Pulp & Paper, which famously defaulted on US$14 billion of bonds issued to foreign investors in 2001.

30 April 2015
US$14b default forgotten as Indonesia billionaire Widjaja sells debt

SINGAPORE: (Bloomberg) Foreign investors have either forgiven or forgotten the events that involved the billionaire Widjaja family in Asia's worst corporate default.

Companies backed by 91-year-old Eka Tjipta Widjaja, Indonesia's fourth-richest person, received orders twice the size of two bond issues last week at yields below the average of Asian junk-rated peers.

Developer Bumi Serpong Damai raised US$225 million from a debut sale of US dollar notes. Golden Agri-Resources, the world's second-largest palm-oil producer, issued S$125 million (HK$731 million) in its third sale in a year. 

The family is preparing a bid for an Indonesian coal producer in the midst of a dollar-debt restructuring.

Fourteen years after Widjaja's sprawling Sinarmas empire was pummelled by a US$14 billion default by its Asia Pulp & Paper business, investors are showing faith in its credit.

The combined market value of 12 family-controlled companies listed on the Singapore and Jakarta exchanges has held steady at about US$15 billion over the past year. Moody's Investors Service rated Bumi Serpong at Ba3, the third-highest junk grade, citing the developer's healthy finances.

"There's always going to be new investors keen to try their luck with the group even after the Asia Pulp & Paper debacle," said Charles Macgregor, head of Asia high-yield research in Singapore at Lucror Analytics.

"They will probably come back every now and then to re-establish their position in the debt market through some of their better businesses."

Asia Pulp & Paper halted payments on a total US$13.9 billion of bonds, loans and trade payables in 2001, after a 20 per cent plunge in global paper prices over three months. 

That included about US$6.7 billion of dollar notes, the biggest missed bond obligation by an Asian company to date, data showed. The firm became mired in legal challenges as Indonesian courts cancelled debts and creditors lost millions.

Founded in 1972, the pulp and paper business controlled by the Sinarmas Group embarked on a global fundraising drive that included a 1995 US share sale. 

Its failure came in the wake of the Asian debt crisis, when companies across the region defaulted on billions of dollars of liabilities and Indonesia was one of three countries forced to seek an International Monetary Fund bailout.

"All the corporate groups in Indonesia were suffering, especially during the 1998 Asian crisis, and Asia Pulp & Paper had tried to continue to service its debt right until we really had to give up in 2001 because of the deteriorating macro situation in the country," said Gandi Sulistiyanto, Sinarmas's managing director in Jakarta. 

"Our group is responsible with debt management despite the bad, difficult past," he added.

The Widjajas are not alone in debt comebacks. Other Indonesian companies have had financial troubles and then successfully returned to the dollar bond market. Property firm Kawasan Industri Jababeka, which reorganised debt in 2002, is selling more of its 2019 notes. 

Gajah Tunggal, the nation's biggest tyre-maker, issued US$500 million of five-year notes in 2013, four years after a distressed bond exchange. Developer Pakuwon Jati restructured global notes in 2005 and raised US$200 million last year.

"Investors have to be mindful of the restructuring history of Indonesian corporates, especially given that many of them have had several reschedulings or restructurings in the past," said Brigitte Posch, head of emerging market corporate debt at Babson Capital Management.

"Investors also need to be familiar with the Indonesian insolvency framework, as it is not the most creditor friendly regime."

Sinarmas is also committing as much as US$300 million to a takeover bid for London-listed Asia Resource Minerals, which owns 85 per cent of Indonesia's fifth-largest coal miner Berau Coal Energy. 

If successful, the group may inject the Berau assets into its Singapore-listed Golden Energy & Resources unit, according to an April 15 exchange filing.

The turnaround in Widjaja's fortunes is splitting money managers who often reference the group's history as a cautionary tale in emerging-market investing after the note holder losses following Asia Pulp's default.

Hal Hirsch, a managing director at New York-based Alvarez & Marsal, which specialises in debt recoveries and is advising some of Bakrie Telecom's bondholders, said that Indonesia can be "a dangerous corporate labyrinth for investors and regulators" due to a lack of transparency.

"History repeats and provides lessons - even in finance," he said.


Widjaja takes on Rothschild with proposed bid for ARMs
15 April 2015
By Silvia Antonioli and Cindy Silviana

LONDON/JAKARTA (Reuters) - A potential bid by Indonesia's Sinarmas Group and hedge fund Argyle Street Management for London-listed Asia Resource Minerals Plc (ARMs) risks scuppering a long-awaited restructuring backed by ARMs co-founder Nathaniel Rothschild.

Shares in coal miner ARMs, formerly known as Bumi, jumped more than 90 per cent to as high as 29 pence on Wednesday after Asia Coal Ventures, a vehicle controlled by Argyle and funded by tycoon Era Tjipta Widjaja's Sinarmas Group, said on Tuesday it was considering a 210 million pound (or US$310 million) cash offer.

The potential offer of 41 pence per share comes a week ahead of a vote on a vital refinancing and recapitalisation plan which could see Rothschild, a scion of the banking dynasty and ARMs' No.3 shareholder, increase his stake of about 18 per cent.

Argyle is also a shareholder in ARMs, whose business is focused in Indonesia, with a 5 per cent stake.

Some shareholders were sceptical about the potential offer.

"This may be an attempt to muddy the waters rather than anything. Until there is an actual bid from a credible counterparty there is nothing for us to take a view on," said Cato Stonex, a co-founder of UK-based asset management firm Taube Hodson Stonex, which has about 1 per cent in ARMs.

Stonex said his current intention was to vote in favour of the plan proposed by the company and Rothschild.

An adviser close to the matter, however, said a firm offer should be on the table within two days.

"Nat (Rothschild) is on the cusp of taking control of the company on the cheap, without paying a control premium. But now there is an alternative," he said. "People who think this is a flaky proposal will be proven wrong within 48 hours."

Argyle's discontent with the proposed solutions to problems at ARMs, which has been hit by executive battles and tumbling coal prices, have led it to look for an alternative together with an experienced Indonesian partner, it said.

Sinarmas Group, whose businesses include energy, palm oil, property, pulp and paper, said the acquisition would help support its own power business.

Sinarmas has a Jakarta-listed coal mining unit, PT Golden Energy Mines Tbk, and owns some power stations.

"As a national company, we support the national priority, especially infrastructure projects," Sinarmas Group Managing Director Gandi Sulistyo told Reuters.

Indonesian President Joko Widodo, who took office in October 2014, has identified developing the country's creaking infrastructure as a focus for his administration.

"This still does not explain why Sinarmas' proposed bid is via an obscure shell company managed by a hedge fund. It cannot possibly derive any synergies given that PT Golden Energy is not making the bid directly," Rothschild told Reuters.

"Furthermore, comments about ARMs needing to be managed by a national interest are not valid -- we have already met with Joko Widodo in March to discuss the investment programme in the power sector via ARMs and its subsidiary Berau," Rothschild added.