BI confirms deal with London Club

BI confirms deal with London Club

Dow Jones, Jakarta

Bank Indonesia confirmed Friday it had reached debt rescheduling agreements with commercial creditors, a day after Standard & Poor's said it had hiked its credit ratings for Indonesia due to the agreements.

The central bank said the government has rescheduled commercial loans that it took out between 1995 and 1997 but was unable to repay due to the 1997-98 Asian financial crisis.

"Bank Indonesia and the government appreciate the continued support of the republic's commercial lenders," the central bank said in a statement.

The rescheduled loans comprise: a US$242.9 million and 6.5 billion yen loan from 1995; a $500 million loan from 1996; and a $500 million 1997 loan.

Under the terms of the rescheduling, the extended principal maturities of amounts not previously rescheduled under the 1995 loan will be repaid over 17.5 years.

The principal payments on the 1996 and 1997 loans were extended by 10 months. Indonesia also agreed to make a late interest payment which it missed in June this year on the 1995 loan, according to the central bank's statement.

S&P raised Thursday its credit rating for Indonesian long-term government debt to CCC+ with stable outlook, lifting a selective default.

Earlier this year, S&P downgraded Indonesia's rating to selective default from CCC previously.

The downgrade came after the Paris Club of government creditors agreed to reschedule $5.4 billion in debt coming due up until the end of 2003, but which Indonesia can't pay because of the aftershocks of the 1997-98 Asian crisis.

S&P argued that Indonesia was technically in default until private creditors also agreed to the terms of the Paris Club deal. Paris Club rules mean debtors must seek the same treatment from private creditors as from governments. Private creditors have agreed to reschedule their loans, S&P said in a statement.

Furthermore, Indonesia's rating remains well below investment grade, reflecting the country's inability to repay debt it has borrowed from overseas.

The country is running a huge budget deficit due to the cost of bailing out its banking sector since the crisis.

S&P said it expected Indonesia to have to reach a new restructuring agreement with Paris Club next year to cover debt coming due from 2004.