Analysts, investors hail RI debt deal

Analysts, investors hail RI debt deal

LONDON (Reuters): Analysts and investors mostly hailed the agreement on the debt rescheduling signed by Indonesia and international banks in Frankfurt yesterday.

The rescheduling program comprises three initiatives relating to private sector corporate debt, external credit to the Indonesian banking system and trade finance.

Ashok Shah, senior portfolio manager of Old Mutual Asset in London said;

"Things are so bad now with non-payment of interest that even this program is just a small part of a large program that is needed. On its own it won't be enough. For Indonesia as a country and Indonesian companies, their ability to repay debt will be damaged for some time."

"The numbers of debt outstanding are changing all the time, some of the banks have lied about it, they overvalued their assets by one-third. A lot still needs to come out of the woodwork."

"It's very very positive that they've started (dealing with their debt problems) but they have a long way to go. Things were so deplorable that without help the whole thing would have imploded. I say well done but we need a lot more."

Jerome Booth, head of emerging market at ANZ Investment Bank in London said;

"I think it is very positive. I would expect this to actually boost the market over time. Clearly, it signals that we could get further deals on corporate debt and basically it is good news. I don't think it's fully been reflected so far in the prices. The main focus now has got to be to see the debt restructuring in not just the banks but also with the corporates come to a conclusion and we have to see the Indonesians co-operating fully with the IMF."

Philip Ehrmann of Gartmore Investment Management in London said;

"Its progress of a sort, but we'll have to watch this space...The devil is in the detail."

"We had heard that it might be an eight year program so obviously four is probably better. But I think that just the fact that they are attempting to sort out this problem is progress, but there still is a long way to go."

Sanjit Maitra, head of economics and strategy of West LB in London said;

"It is certainly encouraging news and will help to resolve one of the most pressing issue in the region. It's a helpful sign in the right direction but it's not sufficient because of all the structural problems that remain."

International bank lending to Indonesia (all figures are in billions of U.S. dollars):

mid 1997 end 1997

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Japanese banks 23.15 22.02

German banks 5.61 6.17

French banks 4.79 4.77

U.S. banks 4.59 4.90

UK banks 4.33 4.49

Swiss banks 2.0 n/a

(Source BIS)

Estimated details of exposure to Indonesia:

German Banks

Deutsche Bank $1.4 billion

Dresdner Bank $1.2 billion

Commerzbank $600 million

(Source:Salomon Smith Barney)

French Banks

Societe Generale $800 million

Credit Lyonnais $1.31 billion

Banque Nationale de Paris $1.02 billion

(Source:JP Morgan)

Dutch Banks (at end Feb 97)

ING $500 million

ABN AMRO $850 million

(Source:JP Morgan)

UK Banks (at end 1997)

HSBC $1.8 billion

Standard Chartered $1.28 billion

Barclays $492 million

NatWest $315 million