Indonesia regrets S&P's 'selective default' decision<\/p>\n
JAKARTA (JP): The Indonesian government said on Tuesday it
\nregretted the decision by Standard & Poor's to downgrade the
\ncountry's foreign currency long-term sovereign credit rating to
\n"selective default".<\/p>\n
Bank Indonesia director Dono Iskandar Djojosubroto said in a
\nstatement on Tuesday the government had never defaulted on its
\ncommercial bank loans or bonds.<\/p>\n
"Indonesia has remained current on all interest payments on
\nthese and other commercial loan obligations, and is fully
\ncommitted to staying current on all commercial debt, including
\nits US$400 million Yankee bond which matures in 2006, and its
\n$300 million FRN (floating rate note) which matures in 2001."<\/p>\n
He added: "Indonesia believes the balance of payment relief
\nprovided by ongoing Paris Club, bank and corporate debt
\nrestructuring, together with the structural economic reforms
\nbeing implemented by the government, will provide the basis for a
\nsustained recovery of the economy beginning later this year."<\/p>\n
Dono said Indonesia initiated negotiations with its Paris Club
\ncreditor nations in August last year to restructure payments on
\n$4.5 billion in bilateral debt maturing between August 1998 and
\nMarch 2000.<\/p>\n
He said that at that time the country was seeking to exclude
\nits commercial obligations from any debt restructuring.<\/p>\n
"However, Paris Club creditors' strict adherence to the
\nprinciple of comparability of treatment between commercial and
\nbilateral creditors made it necessary to seek a parallel
\nrestructuring on $210 million in principal payments due before
\nMarch 2000 on a $350 million standby commercial loan," he
\nsaid.<\/p>\n
Downgrade<\/p>\n
Standard & Poor's lowered its long-term foreign currency
\nsovereign credit rating on Tuesday for Indonesia to selective
\ndefault (SD) from a previously triple-C-plus.<\/p>\n
The U.S.-based rating agency, however, affirmed its triple-C-
\nplus senior unsecured ratings on Indonesia's US$400 million
\nYankee bond due August 2006 and its $300 million euro floating-
\nrate note (FRN) due February 2001.<\/p>\n
Indonesia's single-B-minus long-term local currency issuer
\ncredit rating is unaffected.<\/p>\n
Standard & Poor's (S&P) said that the SD long-term foreign
\ncurrency issuer credit rating reflects Indonesia's distressed
\nrescheduling of $210 million worth of principal on a $350 million
\ncommercial loan, disbursed in 1994 by a syndicate of 70 banks led
\nby Bank of Tokyo Mitsubishi.<\/p>\n
According to an agreement signed on Sunday, new terms on the
\nrescheduled portion of the loan are:
\n * An interest rate of Libor plus seven-eighths, exactly the same
\nas that in the original indenture;
\n * A grace period to March 28, 2002, on which date the first
\nrescheduled principal repayment, an amount of $6.3 million, will
\ncome due; and
\n * A back-loaded, semiannual amortization profile from March 28,
\n2002, onward, culminating in a $39.9 million principal repayment
\non March 28, 2009.<\/p>\n
The two final principal repayments in the original straight-
\nline amortization profile, worth $70 million each, have not been
\nrescheduled and come due March 28, 2002 and March 28, 2003,
\nrespectively.<\/p>\n
The rating agency said in the aggregate, the effective
\nmaturity of the loan has been extended to 11.1 years, from seven
\nyears in the original agreement, while the interest rate has
\nremained unchanged.<\/p>\n
Such terms are less favorable to the creditors than the terms
\nof the original issue, and, therefore, constitute a default under
\nS&P's criteria, despite the fact that the affected creditors have
\nnot voted to declare an event of default, it said.<\/p>\n
The rescheduling completes Indonesia's compliance with its
\nParis Club agreement signed last September, in which all $4.2
\nbillion of principal repayment obligations to Paris Club
\nbilateral creditors due between Aug. 6, 1998, and March 31, 2001,
\nwere restructured.<\/p>\n
The Paris Club rescheduling is conditional upon comparable
\nrescheduling of all commercial loans coming due during the
\nconsolidation period. Given Indonesia's amortization profile, the
\nrestructured 1994 syndicated loan is the only sovereign
\nobligation captured by the burden-sharing stipulation. Neither
\nthe Yankee bond, nor the Euro FRN, comes due in the consolidation
\nperiod, underscoring the likelihood that Indonesia's $426 million
\nworth of rated debt will remain unaffected by the ongoing
\nrescheduling effort, as will sovereign local currency
\nobligations, it said.<\/p>\n
The long-term foreign currency issuer credit rating will
\nremain at SD pending a review of the documentation on the
\nrescheduled syndicated loan. After the review, Indonesia's
\nforeign currency issuer credit rating will be reset to a forward-
\nlooking assessment of the sovereign's general credit standing,
\nthe rating agency said. (rei\/hen)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/indonesia-regrets-sps-selective-default-decision-1447893297",
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