Fund faces pressure over pulp mill plan
By Andrew Wood in Hong Kong
September 18 2007
Environmental groups are preparing to lobby one of Asia’s newest hedge funds, Abax Global Capital, and backers including Morgan Stanley, over the financing of a controversial pulp mill in Indonesia.
Abax launched in July in Hong Kong, aiming to raise more than $1bn to fund private and structured transactions in greater China and Asia. It is fronted by Taiwan-born Chris Hsu, a former star fund manager at Citadel Investment, one of the world’s largest hedge fund groups.
Abax has already bought $25m of convertible bonds in United Fiber, or Unifiber, the Singapore-listed developer of the greenfield pulp mill site in South Kalimantan in Indonesian Borneo. It is now doing due diligence on a further $200m of structured notes earmarked for the project.
Environmental Defense, a US non-governmental organisation, has drafted a letter to Abax and its investors, saying the South Kalimantan project has “a clearly documented likelihood of significant environmental and social harm”.
Criticisms of the project surfaced several years ago, with the Center for International Forestry Research (Cifor) saying Unifiber did not have a detailed plan to support its claim that the mill would not use natural forests.
Abax said the company took such issues very seriously: “We continue our due diligence which includes a full environmental assessment as well as satisfactory analysis on the impact of the project on the surrounding community.”
Unifiber has been involved in similar cases. Environmental pressure forced Merrill Lynch, JP Morgan and Deutsche Bank to pull out of successive deals to finance Unifiber’s attempted $600m purchase of another Kalimantan mill at Kiana Kertas.
Jaka Prasetya, Unifiber’s chief executive,said: “We have never destroyed natural forest.” The South Kalimantan project would process wood only from its 260,000 hectares of plantations in the region.
Morgan Stanley declined to comment.
Source: http://www.ft.com/cms/s/0/e9a94438-657f-11dc-bf89-0000779fd2ac.html
March 20th, 2009 at 2:42 am
[...] pulp and paper mill, which no bank project finance group will touch with a stick because of environmental concerns. Abax puts in USD25mm, with a promise to secure an additional USD200mm to complete the mill. As far [...]