Honggo Cancels Paying IDR3.2 Trillion worth Tuban Petro's Debt

The Asset Management Company (PPA) confirms Honggo Wendratno-owned Sila Kencana Group has cancelled to pay Tuban Petrochemical Industries' (Tuban Petro) IDR3.2 trillion worth debt.
Following the cancellation, the Sila Kencana Group fails to take over a 50% stake in Tuban Petro. President Director of PT PPA Mohammad Syahrial said the settlement of the Sila Kencana Group's liabilities would therefore refer to the credit restructuring agreement signed by the group with the Indonesian Banking Restructuring Agency (BPPN).
"Honggo has cancelled to accelerate the IDR3.2 trillion worth debt payment, we will refer to the credit restructuring agreement, which says the debt payment will be made in 2014," he informed last week.
He said he didn't know the reason behind the cancellation. "I don't know. Probably, Honggo has financial problem. To be sure, the plan has been cancelled, so that the government will keep controlling Tuban Petro until 2014."
Syahrial explained after PPA completed its term by February 2009, Tuban Petro would be handled by the Department of Finance.
Previously, the Sila Kencana Group agreed to accelerate the payment of Tuban Petro's IDR3.2 trillion worth debt with the subrogation method, which would enable Honggo to replace PPA as Tuban Petro's creditor. Subrogation is the transfer of a creditor's rights to a third party.
According to the plan, after the transaction is completed the government would still control a 20% stake in Tuban Petro as part of the Tuban Petro debt restructuring agreement.
Tuban Petro controls a 59.5% stake in Trans Pacific Petrochemical Indotama (TPPI) and an 80% stake in PT Polytama Propindo. TPPI is an integrated petrochemical producer in the northern coast of Tuban, East Java.
It produces light naphtha to produce plastic, aromatic as a raw material to the textile industry, and oil fuel products. The company is able to produce 3.6 million tons of aromatic per annum.
PPA relies on the sale of Tuban Petro, which has IDR3.2 trillion in book value, to patch up its targeted contribution of IDR3 trillion to the 2008 State Budget.