Corporate loan 'signals confidence'

Corporate loan 'signals confidence'

JAKARTA (JP): The World Bank's private sector financing arm,
International Finance Corporation (IFC), and Deutsche
Investitions und Entwicklungsellschaft (DEG) agreed on Thursday
to provide US$28 million worth of loans and equity capital to
Indonesian video cassette producer PT Megaplast Jayacitra.

The loan and equity financing deals, seen by analysts as an
initial sign of renewed confidence in Indonesia, are the first
foreign financing deal concluded by a local company after the
outbreak of the financial crisis in the country in July last
year.

"We extend the loans and equity because we still believe in
the long-term prospects of Indonesia's economy," said IFC's
director for South and Southeast Asia Rashad Kaldany after the
signing of the financing agreements.

IFC, a subsidiary of the Washington-based World Bank, agreed
to invest $14 million in Megaplast, consisting of an $11.5
million loan and $2.5 million in equity, or the equivalent of a
8.9 percent stake.

While DEG, an investment development agency from Germany, will
also provide an $11.5 million loan and invest $2.5 million in
equity.

Managing director of Megaplast Jayacitra Jimmy Samantha said
the eight-year loan would bear an interest rate of 2.5 percent
above the three-month London Interbank Offered Rate (LIBOR).

Megaplast Jayacitra, a newly established joint venture firm
between the Singapore-based MJC Singapore Pte. Ltd and CV
Belanico of Indonesia, is expected to start commercial production
later this year, he said.

"We are now in the trial production process," Jimmy said.

He said MJC and Belanic together owned 82.2 percent of
Megaplast, which would export the bulk of its production.

Jimmy said the $56 million plant would produce 10 million
video cassettes annually starting in 2000.

"Our initial output will be two million cassettes in 1999," he
said.

Kaldany said that although Indonesia was currently struggling
to get out of its worst crisis in decades, IFC did not see any
problems with PT Megaplast because the company would export most
of its products.

Kaldany added that the latest IFC loan to Megaplast would
further increase its investment portfolio in Indonesia, which had
reached $1 billion consisting of $150 million in equity and $850
million in loans to 42 companies.

Of the total $850 million debt financing, IFC itself extended
only about $350 million while the remaining $500 million was
provided by other foreign banks as cofinanciers, he said.

"But between $100 million and $150 million of the IFC loans
are currently at risk of turning into bad credits because the
debtors have difficulties in meeting their obligations amid the
current economic crisis," Kaldany added.

He said IFC had explored all possible options to recover the
loans extended to five Indonesian debt-ridden corporations.

"If we cannot reach an agreement on the loans, we may seek
to settle in the bankruptcy court," he said, while stressing that
bankruptcy proceedings would be a last resort.

Kaldany declined to name the defaulting debtors, but said they
were enterprises focused mainly on the domestic market, which was
deeply depressed by the economic slump. (aly)