'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)