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)