Sat, 11 Nov 2000

Decision on Chandra Asri debt delayed

JAKARTA (JP): The government has delayed taking the final decision on the high profile debt restructuring of petrochemical company PT Chandra Asri.

Chairman of the Indonesian Bank Restructuring Agency (IBRA) Edwin Gerungan said late on Friday that because of the complexity of the case, the Financial Sector Policy Committee (FSPC) needed another week to make a decision.

"Because the case is complex and because there was no consensus among the FSPC members, we have to analyze them (the various restructuring options) again and finish in one week," Edwin told a press conference following a meeting between FSPC, Prajogo Pangestu and representatives of Japanese Marubeni.

"We need more time because we want to ensure that the interest of the state is optimized," he added.

The FSPC includes several senior economic ministers and gives final approval on IBRA's key deals.

Prajogo Pangestu is the co-founder of Chandra Asri, while Marubeni is the leading foreign creditor of the petrochemical giant.

The FSPC was initially expected to reach a final agreement with Marubeni and Prajogo over the restructuring of Chandra Asri on Friday.

Chandra Asri, which has been a controversial company from the start of its construction due to the alleged cost mark-up, owes around US$700 million to Japanese creditors and around Rp 3 trillion (US$329.67 million) to domestic banks. The debt to the local banks had been taken over by IBRA.

In June, the government reached a debt to equity swap restructuring method with Marubeni for Chandra Asri's debt, under which Marubeni would have a 20 percent stake in the company in exchange for some $100 million debt, while IBRA would end up with an 80 percent stake.

But the government later changed its mind on the grounds that the 80 percent stake would be perceived by the public as a government bailout of the conglomerate.

The government also fears that by owning 80 percent of Chandra Asri, it could be liable to any future debt of the company.

The restructuring of Chandra Asri is one of the key points of the country's restructuring program.

Sources said that Japan's powerful Ministry of International Trade and Industry (MITI) has put strong pressure on the Indonesian government to immediately resolve the restructuring case of Chandra Asri, the Tuban petrochemical center, and the Paiton I electricity project. Japan is Indonesia's largest foreign lender.

MITI stressed its demands recently during a meeting in Tokyo with Minister of Trade and Industry Luhut Pandjaitan, sources said.

The Tuban petrochemical center also owes debt to Japanese creditors, while the Paiton I electricity project involves Japanese investors.

Luhut has reportedly said that the government was also planning to review the earlier restructuring deal of the Tuban petrochemical center.

The government has been under fire for previous debt restructuring deals due to a combination of poor transparency and questionable restructuring methods.

The most prominent case is the restructuring of the giant textile industry Texmaco Group, which many say is equal to a government bailout.

Even the International Monetary Fund and the World Bank have expressed concern over past debt restructuring deals completed by IBRA.

IBRA received over Rp 250 trillion worth of non-performing loans (NPLs) from closed down and recapitalized banks. The agency is focusing on restructuring the NPLs with an individual loan size of more than Rp 50 billion which is owed by only a small group of large businesses.

Restructuring the corporate debts is the key to reviving investor confidence in Indonesia and to enable domestic banks to resume lending to the real sector. (rei)