Nod likely for RI bank debt plan<\/p>\n
SINGAPORE (Dow Jones): At the end of a six-city roadshow to
\nsell the Frankfurt debt agreement to creditors, Indonesian
\nofficials said yesterday the presentations received a \"good
\nresponse\" and an agreement on US$7 billion in bank debt should be
\nin place within a month.<\/p>\n
But the officials gave little indication on whether a proposed
\nframework to roll over a more staggering US$60 billion in
\ncorporate debt was also received favorably. This framework, the
\nIndonesia Debt Restructuring Agency (INDRA), was part of an
\nagreement with a steering committee of bankers reached in
\nFrankfurt in early June.<\/p>\n
\"The primary purpose of the roadshow has not been to discuss
\nINDRA,\" Mark Walker, an adviser to the Jakarta government, said
\nat a press conference following a presentation to bankers in
\nSingapore.<\/p>\n
The debt agreement offers a voluntary program to debt-laden
\ncompanies under which their obligations will be extended by eight
\nyears and under which they will receive access to dollars at a
\nlocked-in rate. In return, they must resume making loan payments,
\nwhich almost all Indonesian companies have ceased doing.<\/p>\n
Ahead of the roadshow, private bankers in Jakarta said the
\nIndonesian officials needed most to sell the plan for
\nrestructuring corporate debt, while the banking-debt portion of
\nthe Frankfurt agreement was less important.<\/p>\n
\"The principle purpose of our discussion has been to talk
\nabout the two elements of the accord that are to be implemented
\nright away,\" Walker said yesterday, listing agreements on bank
\ndebt and trade financing.<\/p>\n
Asked after the press conference whether securing an agreement
\non corporate debt was more vital to the program, Walker said,
\n\"They're both important. They both have to be dealt with.\"<\/p>\n
He added, \"The banking system is important to the continued
\nviability of the private sector. The private sector needs credit
\nand credit comes from the banking system. You cannot look at the
\nprivate sector and say we'll just look at the private sector and
\nthe banking sector is irrelevant. It's not.\"<\/p>\n
Private sector<\/p>\n
On the private sector side, we really haven't been talking
\nabout commitment, so it's really not a question of asking people
\nto commit,\" Walker said.<\/p>\n
The INDRA program is a voluntary framework and creditors and
\ndebtors will still have to discuss the details of debt
\nrestructuring among themselves.<\/p>\n
\"Of course, there is concern among the creditors about debt
\nforgiveness, but I have to say that of course there will have to
\nbe debt forgiveness,\" he said. \"In many cases, private sector
\nfirms will not be able to repay debt at current levels.\"<\/p>\n
The amount of debt write-offs would vary from case to case, he
\nsaid, with some companies not needing any debt forgiveness.<\/p>\n
The press conference in Singapore followed a meeting with
\nabout 200 bankers, mostly based in Singapore and Malaysia. In the
\npast week, the Indonesian officials have also presented their
\ncase in New York, Frankfurt, Paris, Tokyo and Seoul.<\/p>\n
\"We have been delighted to see a very good response by the
\ncreditor banks with regard to the schemes offered by the
\nFrankfurt agreement,\" Boediono, Indonesia state minister of
\nnational development planning, told the press briefing.<\/p>\n
Walker, who handled the bulk of the conference, said they
\nexpect a proposal to exchange about US$7 billion in mostly short-
\nterm debt owed by Indonesia banks for longer-term debt to be a
\nsuccess.<\/p>\n
Under the plan, the bank debt would be exchanged for one-,
\ntwo-, three- and four-year loan packages at rates of 275 basis
\npoints above the London interbank offered rate (Libor) for one-
\nyear debt with an additional 25 basis points for each additional
\nyear.<\/p>\n
About a third of the US$7 billion is owed by state-owned banks
\nand the remainder by private banks, Walker said.<\/p>\n
The 13 members of the Indonesia's bank creditor steering
\ncommittee, including Chase of the U.S. and Germany's Deutsche
\nBank, are expected to join the program, Walker said, adding this
\nrepresents a \"significant portion\" of the debt, but less than
\nhalf.<\/p>\n
Bankers in Singapore expressed optimism on restructuring
\nprivate debt.<\/p>\n
\"My opinion is positive, and I think they are going to reach
\ntheir target,\" said Orazio Coco, Singapore branch marketing
\nmanager for Italy's Banca di Roma, citing the plan to restructure
\nabout US$7 billion in bank debt.<\/p>\n
Coco and about 200 other bankers attended yesterday the final
\nmeeting in a six-city roadshow held by Indonesian officials to
\nsell the Frankfurt agreement between creditors and Indonesian
\ndebtors.<\/p>\n
\"Everybody is involved with the situation,\" Coco said as he
\nleft the meeting, but he added, \"I think most of the banks still
\nhaven't decided.\"<\/p>\n
Heikki Pero, head of corporate banking for the Singapore
\nbranch of Finland's Merita Bank he generally views the plans
\npresented Wednesday as positive.<\/p>\n
\"The plan looks OK,\" he said. \"It's the only plan that exists,
\nand (we) have to accept it.\"<\/p>",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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