Narrative
Full Description
Project narrative
On March 27, 2015, Managing Director of Sinar Mas Group, G. Sulistiyanto released a statement saying that Sinar Mas Group — through three of its subsidiaries — had secured a $1.51 billion loan from the China Development Bank (CDB) and ICBC Financial Leasing to fund the conglomerate's expansion in the power, pulp and telecommunication industries in Indonesia. PT Dian Swastika Sentosa Tbk (DSS) secured $510 million for the construction of a 2x150 MW mine-mouth power plant in Musi Banyuasin Regency within South Sumatra Province. Another Sinar Mas Group subsidiary — mostly likely Asia Pulp & Paper (APP) — secured $700 million ($350 million and RMB 2.12 billion) for pulp and paper development (most likely construction of APP's massive bleached hardwood kraft (BHK) pulp mill in South Sumatra). Smartfren — a third subsidiary of Sinar Mas Group — secured $300 million for telecommunications activities. To precisely represent the sectoral/project breakdown of this loan financing and the contributions from each Chinese bank, AidData has captured this transaction in 6 distinct records. For the $510 million allocable to the construction of a 2x150 MW mine-mouth power plant in Musi Banyuasin Regency, Record ID#70718 captures CDB's estimated contribution and Record ID#105328 captures ICBC's estimated contribution. For the $700 million allocable to the pulp and paper development project, Record ID#105330 captures CDB's estimated contribution and Record ID#105331 captures ICBC's estimated contribution. For the $300 million allocable to telecommunications activities, Record ID#105332 captures CDB's estimated contribution and Record ID#105333 captures ICBC's estimated contribution. The plant had reached 90% construction completion in June 2015, and began operating commercially in December 2016.
Staff comments
1. In 2001, Asia Pulp & Paper (APP), called a debt standstill on nearly $14 billion of bonds and loans. That made it one of the biggest defaults by an emerging markets corporate entity. What followed was a protracted and bitter battle between APP and an assortment of international creditors, many of whom had sharply competing interests. Among those fighting to get their money back were the Indonesian Bank Restructuring Agency, which was created to save Indonesia’s banking system during the Asian financial crisis in the late 1990s, and a group of mainland Chinese banks that had lent over $1 billion to APP’s Chinese mills and which formed a separate creditor group. With several state-of-the-art mills located in China, APP feared these assets could be seized by the mainland banks: so it ring-fenced its Chinese operations from its Indonesian assets, kept the Chinese banks separate from its other creditors, and eventually spun off APP China in a debt-for-equity swap that gave the Widjaja family a substantial stake. However, the vast bulk of APP’s debt was owed to a multitude of international creditors, including plenty of famous names; banks such as Deutsche Bank, ABN Amro, Credit Lyonnais and Japan’s Fuji; bond market mainstays like Fidelity Investments and John Hancock Funds; distressed-debt investors like Oaktree Capital Management and Gramercy Advisors; and government export credit agencies in the US, Japan and Europe. The big Japanese trading houses Mitsubishi Corp and Nissho Iwai Corp were also owed money. Negotiations over APP’s restructuring dragged on for years. 2. Several sources suggest that the loan may have been issued to Paper Excellence B.V., a wholly-owned subsidiary of APP (see https://www.burnabynow.com/highlights/deforestation-inc-investigation-unravels-bc-forestry-links-to-china-6640124 and https://www.cbc.ca/news/business/paper-excellence-pulp-china-1.6772654 and https://www.cbc.ca/news/politics/paper-excellence-government-review-1.6864399). This issue warrants further investigation. 3. To precisely represent the sectoral/project breakdown of this loan financing and the contributions from each Chinese bank, AidData has captured this transaction in 6 distinct records. Because the individual contributions of the banks are unknown, AidData assumes equal contributions across the two members of the loan syndicate. For the $510 million allocable to the construction of a 2x150 MW mine-mouth power plant in Musi Banyuasin Regency, AidData Record ID #70718 records the contribution from CDB ($255,000,000) and Record ID #105328 records the contribution from ICBC ($255,000,000). For the $700 million allocable to the pulp and paper development project, AidData Record ID #105330 records the contribution from CDB ($350,000,000) and Record ID #105331 records the contribution from ICBC. For the $300 million allocable to telecommunications activities, AidData Record ID #105332 records the contribution from CDB ($150,000,000) and Record ID #105333 records the contribution from ICBC.