Bankers say RI debt plan may be delayed

Bankers say RI debt plan may be delayed

FRANKFURT (Dow Jones): Snags in negotiating Indonesia's US$64 billion of corporate debt to international lenders are likely to cause a delay in the planned Aug. 6 implementation of the country's overall debt-restructuring package, European bankers say.

Two days before the July 23 deadline for extending maturities of $8 billion to $9 billion of non-trade related debt of Indonesian public and private-sector banks, bankers surveyed in Europe told Dow Jones Newswires that much still needs to be discussed on the separate corporate issues.

The bank and corporate debt restructuring plans are two elements of an $80 billion agreement reached in principle between Indonesia and a steering committee of international creditors in June.

Bankers yesterday said they want all elements of the overall package to be agreed before the restructuring takes effect.

For that reason, some bankers said they expect the July 23 deadline to be pushed back to accommodate the continued negotiations.

In fact, it could take several months of discussions before international bankers and their Indonesian debtors are willing to sign off on all aspects of the deal, they said.

"The link between the bank-debt solution and the corporate side of the plan has been neglected," said Erich Brogl, Dresdner Bank AG's general manager of corporates and institutions.

The corporate portion, which seeks to restructure $64 billion of Indonesian companies' outstanding debt, "is the most important part (of the plan). It involves the most money," Brogl said. "And yet nothing is done."

Bankers said an August 6 start date -- mentioned by Indonesian government officials during their worldwide roadshow earlier this month -- is quite unrealistic given the amount of details that still must be worked out.

Bankers cite a lack of information flow from the bank steering committee as well as scant details offered by Indonesian officials.

There is a good chance some banks will opt out of the June agreement. "We're still waiting to hear whether the (Indonesian) companies will sign on," said one Amsterdam-based banker who declined to be named.

"And we still don't understand how a lot of this will work or whether we want to participate," he said.

Since the June agreement is voluntary for both Indonesian corporations and their creditors, "it's crazy to think all" $64 billion will be successfully restructured, Brogl added.

A major problem, bankers said, is that Indonesian companies are hesitating to lock in an unfavorable dollar-rupiah exchange rate, and that participation in the program could therefore be low.

The bulk of the debt outstanding is denominated in dollars. As it stands, the program will provide Indonesian companies dollars in exchange for rupiah for the next eight years at a rate derived from the rupiah's strongest levels in the 11 months after the company signs up for the program.