Chase optimistic on RI debt exchange program

Chase optimistic on RI debt exchange program

NEW YORK (Dow Jones): Chase Manhattan Bank Corp. will tender
all Indonesian bank debt eligible for exchange for new loans as
part of the country's sweeping debt restructuring program, the
chief credit officer of the U.S. bank said Tuesday.

"We will tender 100 percent of eligible debt," Robert Strong
said in a telephone interview, underscoring Chase's commitment to
the success of the exchange program.

Of the $400 million that Indonesian banks owe Chase, Strong
estimated that about 90 percent would be eligible and tendered
for exchange for fresh loans guaranteed by the Indonesian central
bank.

The debt contracted by Indonesian banks, including derivatives
and guarantees, must mature before April 30, 1999 to qualify for
the exchange.

Chase also has about $200 million in trade finance
arrangements with Indonesian banks which will be handled under a
separate program, the chief credit officer said.

Strong said he's confident the Indonesian debt exchange
program will attract enough interest from foreign creditors to
move forward. "We remain optimistic that (the program) will be
successful," he said.

Indonesia would kick off a six-city marketing tour on
yesterday in New York to woo international bank creditors.

The International Monetary Fund's number-two man, Stanley
Fischer, was scheduled to attend the New York roadshow, while
Coordinating Minister for Economy, Finance and Industry Ginandjar
Kartasasmita will lead the Indonesian delegation.

Under the terms of a June agreement between Indonesia and
foreign creditors, the exchange program will move forward if
financial institutions tender at least $6 billion in debt. If
only $4.5 billion are tendered, Indonesia will have the option of
making the exchange effective.

"I'm optimistic they'll get at least $4.5 billion," Chase's
credit officer said, noting that the program provided an
"appropriate balance between the debtors' and creditors' needs."

A source familiar with proceedings said that upward of $7
billion in bank debt would qualify for exchange.

Because derivative contracts can't be quantified accurately
before they expire, the source said it was difficult to assess
how much would be eligible. Banking sources estimated that about
$1 billion in derivative contracts would qualify for tender.

Also somewhat difficult to quantify are obligations of banks
under guarantee, the source said.

Strong said that given the dire straits of some Indonesian
banks, Chase thinks some debt forgiveness may be needed.

"We recognize that there will be some situations where debt
forgiveness or debt-for-equity (swaps) could be required," the
Chase banker said, noting that these types of arrangements will
be done on a case-by-case basis. The official declined to
estimate how much debt forgiveness would be granted.

Debt write-offs weren't mentioned in the June agreement, but
many bankers familiar with the plan say that they will be
required for the restructuring to be successful.

The bank debt exchange program is part of a wide-ranging debt
restructuring agreement reached between Indonesia and its
creditors on June 4 in Frankfurt.

Also included in the deal is a plan to roll over about $4
billion in trade finance arrangements and to reschedule about $60
billion in debt held by Indonesian private and public companies.

The Chase official said that Indonesian companies had already
repaid about 80 percent of arrears due on the bank debt and trade
financing and that the rest was in the process of being repaid.

The repayment of the outstanding arrears, believed to be
around $1 billion total, is a precondition to the exchange
program moving ahead.

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