'Debt haircut' may benefit creditors: Sinivasan

'Debt haircut' may benefit creditors: Sinivasan

JAKARTA (JP): The country's heavily indebted private sector
should not ask for debt reductions since such a move would only
benefit foreign creditors, a key executive of a local
conglomerate warned on Saturday.

Chairman of integrated textile giant Texmaco Group, Marimutu
Sinivasan, said many foreign creditors would actually be willing
to offer a "debt haircut", but with the intention to control the
local indebted companies in the end.

"The creditor will say, OK we'll give a cut, but we also want
to become a partner and have a share (in the company) and sit as
a director," he told reporters.

"This is a new form of colonialism. We should realize this,"
he was quoted by Antara as saying.

Sinivasan explained that many local businesspeople were
looking for a debt cut because they were unaware of the
disadvantages of such a move.

"Once we started negotiations, we then realized what the
creditors wanted."

He said Texmaco had not asked for any debt reductions, adding
that the group had not applied to the Indonesian Debt
Restructuring Agency (INDRA) as well since it was still
negotiating with its creditors to restructure its debts.

"We're also still studying the debt settlement scheme (offered
by INDRA)," he said.

INDRA was launched in early August to provide local debtors
with a debt settlement framework and the foreign exchange to
repay their overseas debts at a locked-in exchange rate.

Companies entering INDRA must first have reached an agreement
with their creditors to extend their debts over an eight-year
period.

The country's private sector overseas debts currently total
US$64 billion, excluding local bank debts.

Companies failing to reach a debt restructuring agreement will
have to face a commercial court with the possibility of being
declared bankrupt.

Sinivasan said that many local companies were actually capable
of repaying their debts as long as the rupiah's exchange rate
against the U.S. dollar was not excessively bad.

He added that an acceptable rupiah-dollar exchange rate should
be near the 7,000 level.

The rupiah closed at Rp 8,200 on Friday in the wake of an
interest rate cut by the U.S. Federal Reserve. (rei)