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)