Last tycoon standing with Suharto-era debt
By John McBeth
JAKARTA - Fifteen years after Indonesia's financial meltdown, Marimutu Sinivasan, founder and former chairman of the failed Texmaco textile and engineering group, remains the last man standing - he is the only Suharto-era tycoon who has yet to settle with his creditors.
As long as the saga drags on, the Hong Kong-based investors who took a speculative stake in bankrupt textile subsidiary PT Polysindo Eka Perkasa (PEP) eight years ago have to rely on
cash collateral to raise the working capital needed to keep the company in operation.
Sinivasan, 76, and his giant debt overhang are also an omnipresent obstacle to the secure-debt restructuring plan of PEP, now renamed PT Asia Pacific Fibers (APF), and its hopes of financing a US$100 million expansion.
That means a company contributing to 23% of local textile industry needs and 10% of the country's textile exports is in total deadlock, unable to add to its 4,000-strong workforce or expand a client base that provides another 200,000 jobs.
Medan-born of Tamil-Indian descent, Sinivasan enjoyed close ties to former president Suharto and his family, receiving hundreds of millions of dollars in loans from state banks and other institutions, mostly in the final stages of Suharto's 32-year rule.
People who know him describe the one-time batik trader as a relentless networker with an over-sized ego and a good strategic mind who was driven not by money or a thirst for political influence but by a ruthless ambition to succeed.
The reason he remains the odd man out - with $3.4 billion in debt parked with State Enterprise Ministry nursemaid Asset Management Company (PPA) - can be explained by the agreement he and PPA signed after Texmaco was declared bankrupt in 2005.
That deal left him with 100% of the shares of Jaya Perkasa Engineering (TPE), the holding firm for his near-idle machinery venture, and a 30% share of Bina Prima Perdana, the textile parent in which the state holds the remaining 70% interest.
Crucially, Hong Kong investors ADM Capital and Spinnaker Capital were unaware the agreement also stipulated that any sale of Texmaco must be done in a bundle, unless otherwise approved by the Finance Ministry and the indebted tycoon himself.
For all that, Sinivasan acts like the aggrieved party. Only last January, he sued PPA, state-owned Bank Negara Indonesia (BNI) and the Finance Ministry for causing Texmaco's bankruptcy by failing to commit to an agreed trade financing facility.
Last December, a South Jakarta court ordered the government to hand back control of the firm's assets to Sinivasan, saying a May 23, 2001, restructuring agreement with the state-run Indonesia Bank Restructuring Agency (IBRA) was unlawful.
Ignoring subsequent debt payment agreements, the court based its ruling on a Finance Development and Audit Board audit at the end of 1999, which found Texmaco still had assets in excess of its debts.
Now under appeal, the latest legal twist is typical of a seemingly teflon-coated tycoon, who never did pay the good-faith deposit required of the owners of the 120 other ailing companies placed under IBRA supervision in 2000.
Not only did he default on the 2001 debt workout deal signed with IBRA, but some of the unprecedented BNI cash injections meant to sustain Polysindo's operations were reportedly quietly diverted to try and save the dying engineering unit.
When president Abdurrahman Wahid was replaced by Megawati Sukarnoputri, new state enterprise minister Laksamana Sukardi proved less than sympathetic to Sinivasan's cause and by April 2003 Sinivasan's working capital facility had collapsed.
In his suit, Sinivasan blames the International Monetary Fund and an unnamed foreign power for influencing the government's decision to finally take a tighter control over the productive part of his former Texmaco empire in 2003.
In 2006, Sinivasan was accused of failing to settle a bank debt and fled to the Indian city of Chennai, where for a brief period he was on Interpol's wanted list. He was later acquitted of all charges and returned to live in Indonesia in 2009.
Only months before he went into self-imposed exile, ADM and Spinnaker saved Polysindo from bankruptcy under a creditor-led peace plan that left the joint venture known as Damiano Investments BV with a 60% stake.
But 28% of the publicly listed company's $1 billion in guaranteed debt - or $270 million - remained in the hands of PPA, which replaced IBRA at the end of its mandate in 2004 and now functions on an annual $3.8 million management fee.
Texmaco's status as a going concern remains clouded by the fact that PPA has held four unsuccessful auctions - the last one called off in 2010 when then-finance minister Agus Martowardojo ruled its assets had been under-valued at $130 million.
Sinivasan has not been shy about mounting legal challenges at every step, but mindful of the vagaries of the country's corruption laws, officials are also reluctant to do anything that could lead to them being accused of causing losses to the state.
The whole process has now ground to a halt, and without bank loans APF has had to use its annual excess cash flow to upgrade facilities, with Damiano providing about $100 million in working capital and capital expenditure loans over the years.
Analysts familiar with the case believe the only solution is to move the portfolio from PPA, where it is going nowhere, to the Finance Ministry's Center for Government Investment, which can provide the guarantees necessary for bank financing.
Starting out as a textile manufacturer in the 1970s, Sinivasan built Texmaco into one of the world's largest integrated polyester operations, selling to 55 countries and boasting revenues of up to $350 million at the prevailing exchange rate in the mid-1990s.
At the same time, he ambitiously expanded into machine tools and vehicle manufacturing, following the same model as Japan and Korea in developing an integrated industrial enterprise.
His place at the Suharto table stemmed from the president's conviction that his ministers were in the pay of the Americans and Japanese and, as long as they were, there was never going to be any real transfer of technology to develop local industry.
When Sinivasan presented his vision of a domestic manufacturing base, Suharto was happy to organize the financing. It might have worked if the !997-98 meltdown had not happened and he had taken on partners instead of trying to do everything himself.
The crash brought Indonesian corporates down to earth, though in Sinivasan's case it was more of a soft landing - thanks in part to the lobbying efforts of his youngest brother, Marimutu Manimarem, the deputy treasurer of the former ruling Golkar Party.
For Manimarem, the landing was anything but soft. On August 3, 2003, the burly 46-year-old fell to his death from a downtown Jakarta high-rise. He never left a suicide note.
John McBeth is a former correspondent with the Far Eastern Economic Review. He is currently a Jakarta-based columnist for the Straits Times of Singapore.
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