Anthony Salim's Comeback May Be Coming Apart

The Indonesian tycoon is having trouble unloading assets

Late last year, Anthony Salim created waves by announcing he would restructure what was Indonesia's biggest conglomerate, the $20 billion Salim Group. He would raise $4 billion by selling assets, use the money to clean up his Bank Central Asia (BCA), which was nationalized last May, and then buy back a stake in the bank. Salim was the first to make such a move and looked likely to blaze a trail for dozens of other indebted Indonesian tycoons.

Now, these bold efforts are faltering as potential buyers of his most precious assets get cold feet. That could deal a serious blow to Salim's plans to rebuild his empire, which was decimated by the violence and upheaval surrounding former President Suharto's ouster last May. And if the plans unravel, other Indonesian tycoons would have an excuse to duck restructuring. It would also confirm the fears of foreign companies already leery of investing in Indonesia.

A serious setback could also jeopardize Salim's goal of buying back a minority stake in BCA, once the country's largest private bank. The Indonesian Bank Restructuring Agency wants BCA to become the backbone of a major bank that it intends to cobble together from several nationalized banks. BCA has obvious attractions: more advanced technology and more branches than any other former private bank in Indonesia.

DEALS IN LIMBO. Salim's hope of playing a role in a bigger BCA and raising funds for its cleanup depends on his ability to sell off enough assets. Salim's noodle business, Indofood Sukses Makmur, is seeking buyers for a 60% stake in Bogasari, one of the world's largest flour mills. Salim's Indocement Tunggal Perkasa wants European cement makers Holderbank Financiere Glarus of Switzerland and Lafarge of France to buy a 20% equity stake. And Salim's Jakarta-based Indomobil, which assembles Mazda and Suzuki cars, is jockeying to sell a stake to Ford.

But the deals have run into problems. For instance, Salim wanted to sell 30% stakes in Indofood to First Pacific Co. of Hong Kong, partly owned by the Salim family, and to Nissin Food Products of Japan for $570 million. But First Pacific cites "unfulfilled conditions" for delaying the purchase. Its executives say the Indofood deal can't go through until the eight bank syndicates to which Indofood owes $900 million agree to ignore an unspecified breach in loan covenants. "No one ever said this would be easy," says Bob Sherbin, executive vice-president of First Pacific. Nissin is also balking, calling it "extremely difficult" to buy a stake if the First Pacific deal were to fall through.

In another case, Salim had agreed to sell his Singapore-based property developer, United Industrial Corp., to HKR International Ltd. of Hong Kong for $180 million. But HKR backed out of the deal in late March after United Industrial's profits tumbled 44%.

Analysts suspect Salim, who declined to be interviewed for this story, of causing some of the delays. "It's a smoke screen," says an analyst in Hong Kong. If Salim is reluctant to proceed, says a securities analyst in Jakarta, the reason could be that Islamic members of Parliament are calling the Indofood deal an attempt to sneak his assets offshore: First Pacific is 31%-owned by the Salim family. It's also possible that he is delaying in hopes the value of his companies will rise as Asia begins to recover.

DELAY HURTS. Some analysts are still betting the deals will go through. "Indofood's creditors have to recognize that they face fewer uncertainties by getting First Pacific and Nissin in there to manage the business and get all their debt back," says Philip Tulk, an analyst at Lehman Brothers Asia in Hong Kong. Salim Group executives insist that, despite appearances, restructuring is proceeding. "It's still going through, but it's somewhat delayed," says one.

But Indonesia can ill afford more delay. It needs to regain the confidence of foreign investors to get its economy back on track. The pressure is heavy because the cost of cleaning up Indonesia's bank mess soars every day and could easily double earlier estimates of $34 billion. More bad news out of the banking sector--from Salim or any other tycoon--will continue to sap the little confidence left in Indonesia.

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