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)