Companies nearing agreement on $10b debt restructuring

Companies nearing agreement on $10b debt restructuring

JAKARTA (JP): More than a dozen companies with nearly US$10
billion in overseas debts are moving ahead with plans to reach a
restructuring agreement with their creditors under the auspices
of the Jakarta Initiative Corporate Restructuring Task Force,
according to a key government official.

The chairman of the task force, Jusuf Anwar, said on Thursday
that the debtors had started providing necessary information
about their companies to the task force to facilitate the
restructuring negotiation process with creditors.

"More information about their cash flow and restructuring
plans will be submitted. Once all the information is complete and
once we've talked with the creditors, we'll immediately bring the
two sides to the negotiation table," he announced on the
sidelines of a seminar.

In the latest letter of intent to the International Monetary
Fund, the government stated that the task force had already met
with a dozen companies, which have a combined debt exposure in
excess of $3 billion and which are interested in participating in
the restructuring program.

"It's now more than that... It's less than $10 billion (in
overseas debts)," he said.

Corporate reorganization is seen by creditors as essential in
debt restructuring agreements.

The country's private sector is saddled with a total of $64
billion in overseas debts (excluding interbank debt), leaving
many companies technically bankrupt even after the rupiah
appreciated by 40 percent to reach less than Rp 7,000 to the U.S.
dollar. The rupiah, which plunged to its lowest level of Rp
17,000 against the greenback in January, was only about Rp 2,500
to the dollar when most loans were made before July last year.

The government launched the Indonesian Debt Restructuring
Agency (INDRA) in early August to provide a framework for debt
settlements, including by providing needed foreign exchange at a
lock-in exchange rate.

To be eligible for the INDRA scheme, debtors first have to
reach an agreement with their creditors to extend the due date on
their debts for an eight-year period, including a three year
grace period.

So far, creditors have been increasingly impatient with the
lack of progress in the negotiation process, with some creditors
resorting to filing bankruptcy claims with the country's
fledgling commercial court. Most end up disappointed.

In an effort to reach out-of-court settlements, the government
launched the Jakarta Initiative Corporate Restructuring Program
in September, providing incentives and eliminating regulatory
obstacles for corporate reorganization which includes mergers,
asset swaps and debt-for-equity conversions.

"The strengthening of the rupiah is a very pleasant surprise.
It will provide a good environment at the negotiation table
because creditors are now increasingly confident about the
recovery of the economy and debtors," Jusuf said when asked about
the recent considerable appreciation of the rupiah.

The Jakarta initiative is planning to arrange a two-day forum
on Nov. 2 in Jakarta, in which some 400 creditors and debtors
will discuss the various difficulties in reaching a debt
settlement.

"Debtors will be divided into specific industries and placed
in special rooms to discuss the difficulties with their
creditors," Jusuf said.

"So when they meet for a one-on-one negotiation, the two sides
will have a mutual understanding about the difficulties," he
added.

Once the debtors and creditors reach a restructuring
agreement, they're expected to enter INDRA for a debt settlement.

In a separate seminar, Bank Indonesia director Achjar Iljas
said on Thursday that creditors were not legally allowed to file
bankruptcy claims against commercial banks, because under the
local banking law such a role was the sole right of the central
bank.

He explained that this was because Bank Indonesia was the
single supervising institution of the banking sector, and that
the industry had a different role than other business sectors.

"A bank has an intermediary role, it collects money from the
public and channels it to the economy. The industry is strategic
to the national economy," he said. (rei)