United Fiber to sell bonds to Morgan-affiliated fund

(2007-07-17）

(JAKARTA) United Fiber System Ltd, a Singapore-based forestry company, said a hedge fund affiliate of Morgan Stanley has agreed to buy US$200 million of bonds and warrants, which will help the company build a pulp mill first planned in 2002.

United Fiber on July13 also agreed to sell US$25 million of bonds convertible into shares to the hedge fund, Hong Kong-based Abax Global Capital Ltd.

After the securities are converted into shares, Abax Global will own 4.4 per cent of United Fiber, the company said. Morgan Stanley owns a minority stake in Abax.

The proceeds may help United Fiber build the US$1 billion pulp mill in the Indonesian part of Borneo by 2010, eight years after it was planned. United Fiber had to delay constructing the plant because of a government move to cancel the company’s right to use forest area for timber, and lack of funding. The Supreme Court stopped the government from cancelling the right in 2005.

‘We are making sure that we get financing for our pulp mill,’ United Fiber’s finance director Choo Lye Heng said in an interview from Singapore on July13. ‘This makes us very committed to raising funds for the mill.’

United Fiber expects the construction to start by the end of the year, Mr Choo said. China National Machinery & Equipment Import & Export Corp, which is building the plant, will fund 80 per cent of the mill.

The pulp mill, which will be run by United Fiber’s subsidiary PT Marga Buana Bumi Mulia, will have a capacity to produce 600,000 tonnes of bleached hardwood kraft pulp annually.

United Fiber will sell the pulp produced in the Kalimantan mill to CellMark AB, the world’s biggest pulp trading company, and China National Machinery, Mr Choo said. About 10 per cent of the production will be sold in Indonesia.

United Fiber and Abax are negotiating the terms of the bonds and warrants, the two companies said in a statement on July13. Lazard Asia Ltd is advising United Fiber. — Bloomberg

《Business Times》