Defects reported in major corporate restructuring deals

JAKARTA (JP): The independent oversight committee of the country's corporate debt restructuring program announced on Wednesday that it had found "significant" defects in four corporate restructuring deals approved by the Financial Sector Policy Committee (FSPC).

Oversight committee chairman Mar'ie Muhammad said that the four deals included the restructuring of PT Chandra Asri, Tirtamas Group, PT Seamless Pipe Jaya and PT Permadani Khatulistiwa Nusantara.

"In general, the restructuring of the four companies has not been in line with the corporate restructuring principles introduced by the FSPC itself," Mar'ie said following a closed- door meeting with the House of Representatives Commission IX on state budget and finance.

"But this doesn't necessarily mean that there has been fraud," he added.

He said that the oversight committee would report its findings to the FSPC this week and the latter would announce full details of the report.

Mar'ie expected the FSPC to take follow up action to the findings of the oversight committee, although the latter's recommendations are not binding.

The FSPC groups several senior economics officials led by Rizal Ramli, previously the coordinating minister for the economy before being appointed as the new finance minister in Tuesday's Cabinet reshuffle. The committee has the final say on the country's major corporate debt restructuring program, particularly those designed by the Indonesian Bank Restructuring Agency (IBRA).

The oversight committee was recently formed following strong criticism, including from the International Monetary Fund (IMF) and the World Bank, over past major corporate debt restructuring deals approved by the FSPC, which many said seemed to favor indebted companies, particularly those owned by well-connected businessmen.

The oversight committee provides a second opinion on corporate restructuring deals worth more than Rp 250 billion (US$22 million). The deals relating to the four companies are part of the 32 corporate restructuring accords submitted by the FSPC to the oversight committee.

Mar'ie said that the committee would soon start its second review phase, covering the restructuring of three companies, including the giant Texmaco Group.

Mar'ie was quick to add, however, that the committee would not review past restructuring deals which had already been implemented or where a final agreement had been established.

The above companies owed billions of dollars to IBRA, which took over the debts from local banks following the devastating 1997 financial crisis. IBRA has a mandate to restructure around Rp 250 trillion worth of bad debts incurred by the domestic banking industry.

The restructuring deals of Texmaco, Tirtamas and Chandra Asri in particular have been the subject of controversy.

Texmaco, an textile and engineering conglomerate owned by M. Sinivasan, owes IBRA around Rp 16.5 trillion.

Tirtamas, a diversified conglomerate operating in finance, cement and petrochemicals, controlled by Hashim Djojohadikusumo, owes around Rp 2.2 trillion.

The two restructuring deals were made when IBRA was still led by Cacuk Sudarijanto.

Chandra Asri, the giant petrochemical company founded by Prajogo Pangestu, owes IBRA debts equal to $425 million.

The company also owes around $730 million to a consortium of foreign creditors led by Japan's Marubeni Corp.

Recently, the FSPC approved the restructuring of Chandra Asri, under which Marubeni would convert around $100 million of its loan into equity, giving it a 20 percent shareholding in the company, while IBRA would convert debt of around $375 million into a 31 percent stake. The remaining 49 percent shareholding would be held by Prajogo.

IBRA, led by its new chairman Edwin Gerungan, rejected the FSPC-approved Chandra Asri deal, however, insisting that Marubeni should convert more of its loan into equity.

Former finance minister Prijadi Praptosuhardjo, who was replaced by Rizal on Tuesday, also turned down the deal. Prijadi has often been in disagreement with Rizal over major economic policies. IBRA is a unit of the powerful finance ministry.(rei)