BI set to exchange $2.7b in bank foreign debts

JAKARTA (JP): Bank Indonesia (BI) said yesterday it expected to exchange US$2.7 billion in domestic bank external debt due this fiscal year with new longer-term loans from foreign creditors.

The central bank said in a statement that all the preconditions for the completion of the "interbank exchange offer" had been satisfied.

The offer, made between July 2 and Aug. 13, allows for Indonesian bank external debt maturing in the fiscal year ending March 31, 1999, to be exchanged for an equal amount of new loans with maturities of one year to four years and guaranteed by BI.

The central bank said the exchange offer represented about 84 percent of the total outstanding bank debt "eligible" for the interbank exchange offer.

Eligible debts exclude derivative and contingent debt obligations.

"In the initial stage, the exchange offer will take place as scheduled on August 25," BI said.

To facilitate the interbank debt exchange offer, the central bank had appointed Deutsche Bank as exchange agent.

BI explained the successful completion of the exchange offer would significantly help "reduce pressure on the rupiah, restore local banks financial condition and accelerate the recovery process of the crisis-hit economy".

The central bank said the interbank debt exchange offer was part of the Frankfurt agreement between local private debtors and foreign creditors in June.

The Frankfurt agreement also deals with trade finance-related debts and restructures corporate debts over eight years, including a three-year grace period.

The government installed the Indonesian Debt Restructuring Agency (INDRA) early this month to help restructure about $64 billion in corporate external debt.

Under the INDRA mechanism, the private sector will install its monthly interest and principal obligation in rupiah to the agency, which will pay back foreign creditors in foreign currencies. (rei)