Agreement between debtors and creditors still far off
By Reiner S.
JAKARTA (JP): Some thorny issues are still seen as obstacles to further negotiations between local debtors and foreign creditors attempting to arrive at out-of-court debt settlements, according to participants in a debt conference on Monday.
Chairman of the Indonesian Chamber of Commerce and Industry Aburizal Bakrie said that innovative solutions, including the use of the best future market value of debtors' assets rather than their liquidation value as the basis of debt restructuring agreements, was essential to encourage local debtors to sit down at the negotiation table.
If foreign creditors stubbornly demand current value for the assets, "forget it, we'll never reach an agreement," he said.
He warned that debt settlement through the Commercial Court would leave foreign creditors facing a greater loss because the value of loan collateral is now only one fifteenth of its pre- crisis value.
"Cornered debtors are also ready to enter bankruptcy proceedings," he told the Jakarta Initiative conference on corporate debt restructuring.
Aburizal said some debtors were already giving up and resorting to the court.
The two-day conference has been convened to encourage debtors and creditors to resume efforts to restructure at least some of the country's US$67 billion foreign debt through out-of-court debt settlements.
Around $32 billion of the debt falls due this year.
A solution to the foreign debt problem is key to bringing stability back to the rupiah-U.S. dollar exchange rate. Out-of- court debt settlements are also critical to prevent job losses in indebted companies.
Aburizal said that foreign creditors should share in the pains of debtors and suggested that a significant amount of debt forgiveness would be required because many local companies are now insolvent.
"I'm not so certain about this restructuring thing," said a top executive of a publicly listed export company who declined to be named.
He pointed out that foreign creditors were reluctant to give local debtors substantial relief on their dues.
"We have talked with creditors before and we failed. I'm not so sure how it will work this time," he said.
"I think both debtors and creditors are currently playing a waiting game," he added.
Foreign lenders are insisting that local debtors provide a full disclosure of information as a precondition to debt restructuring and forgiveness.
Chairman of the National Private Banks Association Gunarni Soeworo admitted that disclosure of information was poor, particularly among small and medium-sized companies.
"The track record in disclosure is poor here, even among many listed companies," added a corporate restructuring consultant.
"We have no problem with the idea of full disclosure, but the problem is that they're also demanding to see plans on how we're going to survive the crisis. Amid the current volatility it's difficult to come up with reliable business plans," the executive of the listed exporting firm said.
The consultant said that the bottom line for the success of out-of-court debt settlement negotiations was foreign creditor confidence in the country.
The vice chairman of the diversified Lippo Group called on foreign creditors to maintain "hope" in the country despite the current recession and uncertainty.
John Knight of Chase Manhattan Bank admitted that many foreign creditors had taken a short-term view in relation to the debt restructuring process.
"Lenders have to take the long-term view. Lenders who help to reorganize debtors will have a greater value," he said.
Chase Manhattan Bank is one of the country's largest corporate creditors.
"A private sector problem is a business problem not a legal problem, so it should not be solved by litigation or bankruptcy proceedings," Knight added.
He also urged borrowers not to delay coming to the negotiating table, saying that early debt restructuring agreements would provide indebted companies with the best opportunity to obtain new financing from the international capital market.