S&P may downgrade RI<\/p>\n
Ovais Subhani, Reuters, Singapore<\/p>\n
Standard and Poor's said on Monday it will \"most probably\"
\ndowngrade Indonesia to selective default after the Paris Club of
\ncreditor nations struck a deal that may force private investors
\nto share the pain of a debt restructuring.<\/p>\n
A downgrade may raise borrowing costs for Indonesia if it
\nmakes investors more wary of investing in the debt-ridden
\nSoutheast Asian state.<\/p>\n
Takahira Ogawa, director of sovereign ratings for the Asia
\nPacific region, said S&P was seeking details from Jakarta and the
\nParis Club about Friday's rescheduling deal to assess its impact
\non other private loans including an estimated $350 million of
\nsyndicated loans.<\/p>\n
\"Unfortunately we'll most probably have to downgrade
\nIndonesia's sovereign rating to selective default because of the
\ncomparability application on the debt from the private sector,\"
\nhe said.<\/p>\n
Indonesia on Friday secured rescheduling of $5.4 billion of
\nprincipal and interest payments it owed to its bilateral
\ncreditors between April 1, 2002 and December 31, 2003.<\/p>\n
S&P uses a selective default rating when an issuer changes the
\nterms and conditions relating to the principal or interest
\npayments on some loans while staying current on others.<\/p>\n
TEMPORARY SETBACK<\/p>\n
But it may only be a temporary setback and the stigma of
\n\"selective default\" may have been diluted given several
\ncountries' experience in recent years.<\/p>\n
S&P may quickly revise up an issuer when the new terms and
\nconditions are agreed. Pakistan was downgraded to selective
\ndefault after a 1999 restructuring of its debt but it was
\nsubsequently upgraded as the revised terms and conditions were
\nseen as improving its capability to pay.<\/p>\n
A Paris Club statement, issued after two days of talks in
\nParis with Indonesian negotiators, said Indonesia had agreed to
\nseek comparable treatment from private creditors but made clear
\nthe club would not insist on absolute equality for all lenders.<\/p>\n
The statement said the Club agreed to exclude maturities
\nfalling due under the interbank exchange offers and a $400
\nmillion Yankee bond due 2006. A Yankee bond is a U.S. dollar-
\ndenominated bond sold by a foreign company or country.<\/p>\n
\"So the syndicated loans amounting about $350 million will be
\nthe subject of the comparability application,\" said Ogawa.<\/p>\n
He said the syndicated loans falling due between April 2002
\nand December 2003 were arranged by a major Japanese bank and most
\nof the loan participants were also Japanese institutions.<\/p>\n
Ogawa said Indonesia was also likely to receive a ratings
\nupgrade when it started paying under the new terms and schedule.<\/p>\n
Friday's debt rework deal was Jakarta's third since Indonesia,
\nthe world's most populous Muslim country, was hit by the Asian
\neconomic crisis in the late 1990s and was the first to cover
\ninterest as well as principal on some of its $140 billion debts.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/sp-may-downgrade-ri-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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