IBRA hopes to reach deal over Chandra Asri debt<\/p>\n
JAKARTA (JP): Indonesian Bank Restructuring Agency (IBRA)
\nchairman Edwin Gerungan said on Tuesday a new deal was expected
\nto be reached with Japan's Marubeni Corp. this week over the
\nrestructuring of olefin producer PT Chandra Asri's debts.<\/p>\n
\"(The debt workout) can be completed this week,\" Edwin said
\nfollowing talks with Marubeni representatives at the Ministry of
\nIndustry and Trade.<\/p>\n
He said the agency and Marubeni were currently reviewing
\nChandra Asri's 2001 financial prospects for the purpose of
\ndesigning a new debt restructuring plan following the latest
\ndevelopments in the petrochemical industry.<\/p>\n
Edwin declined to provide further comment.<\/p>\n
The high-profile Chandra Asri debt workout agreed to by the
\ngovernment and Marubeni late in April collapsed after IBRA
\nrejected the deal.<\/p>\n
The government, via the Financial Sector Policy Committee
\n(FSPC), which groups several senior economics ministers, approved
\na debt restructuring plan for Chandra Asri. Under the deal,
\nMarubeni was to convert some US$100 million of its $730 million
\nin loans to Chandra Asri into a 20 percent equity participation
\nin the company.<\/p>\n
The rest of the loan was to be repayable over a 15-year period
\nwith an interest rate of 1.5 percentage points above the London
\ninterbank offered rate (Libor).<\/p>\n
Under the deal, IBRA, which has about Rp 3 trillion in loans
\nto Chandra Asri, would convert a much greater portion of its
\nloans into a 31 percent stake in the company. The remaining 49
\npercent stake would be held by Prajogo Pangestu, the founder of
\nChandra Asri.<\/p>\n
But IBRA rejected the deal, demanding that Marubeni convert
\nmore of its loans into a greater equity participation in Chandra
\nAsri.<\/p>\n
Prijadi Praptosuhardjo, who was the finance minister at the
\ntime, supported IBRA's stance. The agency is a unit under the
\nfinance ministry, and the FSPC decision could not be implemented
\nwithout the approval of the finance minister.<\/p>\n
The FSPC was chaired by Rizal Ramli, who was the coordinating
\nminister for the economy at the time. But Rizal is now the
\nfinance minister, replacing Prijadi in a recent Cabinet
\nreshuffle. Prijadi no longer holds a position in the Cabinet.<\/p>\n
Meanwhile, Minister of Trade and Industry Luhut B. Pandjaitan
\nsaid after the meeting with the Marubeni representatives that the
\ngovernment had decided to revise the earlier debt restructuring
\ndeal, particularly in light of recent developments in the
\npetrochemical industry.<\/p>\n
\"The price of naphtha (a raw material for olefin production)
\nhas changed. That's why the (previous) debt workout plan is
\nrather difficult to be carried out. We have to make a revision,\"
\nLuhut said. \"We expect we can reach a deal soon.\"<\/p>\n
The Chandra Asri debt restructuring talks have been going on
\nfor about 20 months, with the original restructuring plan
\napproved by President Abdurrahman Wahid in June 2000. But this
\noriginal deal was also rejected by IBRA, after Edwin was
\ninstalled as the new chairman of the agency.<\/p>\n
Under the initial plan, Marubeni was to have ended up with a
\n20 percent stake in Chandra Asri, with the remainder of the
\nMarubeni loans to the petrochemical company being stretched out
\nover a 12-year period with an interest rate of 2.5 percentage
\npoints above Libor. IBRA demanded a longer maturity period, a
\nlower interest rate and greater equity participation by
\nMarubeni.<\/p>\n
Tri Polyta<\/p>\n
In a related development, an official who attended the meeting
\nwith Marubeni executives disclosed that the government will
\npressure polypropylene maker PT Tri Polyta Indonesia to pay its
\nmultimillion dollar debts to PT Chandra Asri to help rescue the
\nolefins industry from its present liquidity crisis.<\/p>\n
The decision was made at the meeting after reviewing the
\nsevere cash-flow problems of Chandra Asri.<\/p>\n
The official, who spoke on the condition of anonymity, added
\nthat unless Tri Polyta settled its trade bills to Chandra Asri
\nsoon, a liquidity crisis may force the olefins center to shut
\ndown within the next few weeks.<\/p>\n
He said Chandra Asri's liquidity problems had been exacerbated
\nby the refusal of Tri Polyta, one of its main domestic customers,
\nto pay for Chandra Asri's propylene since last December.<\/p>\n
Propylene and ethylene are core products of the $1.88 billion
\nolefins industry in Cilegon, West Java.<\/p>\n
He added that Tri Polyta now owed Chandra Asri more than $40
\nmillion.<\/p>\n
Government intervention was deemed necessary to help settle
\nthe trade bill problem. Chandra Asri is in a very delicate
\nposition, having no easy alternative to market its propylene
\nelsewhere because it did not build storage tanks for the bulk
\nchemical.<\/p>\n
Since Tri Polyta is located in front of the Chandra Asri plant
\nat Cilegon, West Java, and both companies were initially
\ncontrolled by the same shareholders, led by Prajogo Pangestu,
\npropylene has been directly piped to Tri Polyta.<\/p>\n
According to Chandra Asri, Tri Polyta has demanded a $50\/ton
\ndiscount on the international price for Chandra Asri's propylene
\nand has simply stopped paying for the product until its demand is
\nmet.<\/p>\n
However, Chandra Asri executives have argued that such a low
\nprice is not even sufficient to cover their production costs.<\/p>\n
He said payment by Tri Polyta was now the only viable way of
\npreventing the olefins industry from closure, at least until its
\nbillion-dollar debt restructuring program was completed.<\/p>\n
The problem, he added, is that Chandra Asri has almost
\nexhausted its $30 million working capital line of credit from
\nBank Internasional Indonesia.<\/p>\n
Chandra Asri executives said they had been negotiating a new
\nline of credit with Bank Mandiri but the state bank had made its
\ncredit commitment on condition of the finalization of Chandra
\nAsri's debt restructuring scheme.(rei\/vin)<\/p>",
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