Decision on Chandra Asri debt delayed

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)