Chandra Asri debt workout approved

Chandra Asri debt workout approved

JAKARTA (JP): After 19 months of tedious negotiations and
high-level lobbying, the government has managed to persuade
Japan's Marubeni Corp. to agree to its latest proposal to
restructure the massive debt of petrochemical giant PT Chandra
Asri.

Coordinating Minister for the Economy Rizal Ramli said on
Thursday that Marubeni had accepted the terms set under the final
restructuring scheme proposed by the Financial Sector Policy
Committee (FSPC).

"Marubeni has sent a letter to me saying that although it is
difficult for them, they accept the FSPC decision," Rizal told
reporters prior to a meeting with the House of Representatives on
amendments to the central bank law.

FSPC groups several senior economics ministers and has the
final say on major corporate restructuring in the country. The
committee is led by Rizal.

Chandra Asri owes about US$700 million to foreign creditors
led by Marubeni, and another Rp 3 trillion to the Indonesian Bank
Restructuring Agency (IBRA), a unit of the finance ministry,
which took the debt over from ailing domestic banks.

Last month, the FSPC proposed a final restructuring scheme for
the Chandra Asri debt.

Under the plan, the debt will be stretched to 15 years, with
an interest rate of 1.5 percentage points above the London
interbank offered rate (Libor). The committee has also requested
that IBRA become a creditor in Chandra Asri, with total exposure
of $50 million.

The FSPC said that if Marubeni disagreed with the scheme, IBRA
would resolve the debt through a legal process.

The final scheme differs significantly from the initial plan
agreed upon in November by President Abdurrahman Wahid, but which
was much criticized as it favored Marubeni.

Under the initial plan, Marubeni was to convert $100 million
of the foreign debts into a 20 percent equity in Chandra Asri,
while IBRA would convert all the local debts into an 80 percent
equity -- leaving Marubeni the sole creditor.

The remaining $600 million would be rescheduled to 12 years,
carrying an interest rate of 2.5 percentage points above Libor.

Toward the end of the 19-month negotiation process, Marubeni
repeatedly insisted that the government stick to the November
agreement.

The FSPC had first demanded that the interest rate be lowered
to equal Libor, and that Marubeni take a greater equity
participation.

Under the final scheme, Marubeni remains a 20 percent
shareholder of Chandra Asri, but IBRA now holds a 31 percent
stake and Chandra Asri founder Prajogo Pangestu holds 49 percent.

The government seems satisfied that Marubeni will not be the
sole creditor of Chandra Asri, which will avoid a bankruptcy suit
by the Japanese creditor against the petrochemical firm.

"We welcome the decision of Marubeni," Rizal said separately
in a press statement.

"The FSPC will ask IBRA and Marubeni to expedite the
finalization of the restructuring agreement, which is in line
with the FSPC decision," he added.

Chandra Asri had been a controversial project since its
construction in the early 1990s due to special favors obtained
from the administration of former president Soeharto. It has also
been alleged that the project had been marked up in price. (rei)