Sat, 09 Oct 1999

Depressed debt task force receives boost from debtors

JAKARTA (JP): Amid the frustratingly sluggish pace of restructuring the country's private overseas debt, local companies acknowledged on Friday the constructive role played by the Jakarta Initiative Task Force in kick starting deadlocked negotiations with foreign creditors.

"We initially lacked confidence in the Jakarta Initiative... but it turns out that they were very helpful in pushing forward the negotiation process, particularly after we became deadlocked," Victor Fanziscus, director of publicly listed underwear manufacturer PT Ricky Putra Globalindo (RPG), said during a media conference organized by the task force.

Like many of the country's indebted companies, RPG has complicated debt obligations, including a US$20 million syndicated loan involving 10 banks, $7.2 million in convertible bonds involving six institutional investors and a $5 million bilateral loan owed to three banks.

Victor said the company's arduous debt restructuring negotiations seemed to be going nowhere, with bondholders and syndication banks having different interests.

He said bondholders would only agree to convert the debt to shares if the banks agreed to extend the maturity of the loans.

"After around one year of negotiations, we decided to come to the Jakarta Initiative.

"The deadlocked negotiations were arbitrated by the Jakarta Initiative as a neutral party .... The staff of the Jakarta Initiative appeared to already personally know the bankers," he said.

Victors said his company had outstanding overseas debts of some $32 million when restructuring talks were opened in June 1998. It also had a $6 million interest rate charge for failing to service its debts on schedule, with this figure scheduled to inflate to $8 million the following year.

Victor said the interest rate charge was erased after the company reached a restructuring agreement last month, which included an extension of syndicated loans into 2004 and the settlement of convertible-bonds debt through a rights issue.

Some 2,200 private Indonesian companies have a total of some $67 billion in foreign debt and Rp 300 trillion in domestic debt.

A resolution of the debt problem is seen as crucial for the country to lift itself from the current economic crisis.

Most companies stopped servicing and repaying their debts after the value of the rupiah against the U.S. dollar plunged by around 80 percent last year.

The government launched the Jakarta Initiative Task Force in September 1998 to encourage debtors and creditors to reach out-of-court debt settlements; a result preferred by the government, as the bankruptcy alternative would lead to mass layoffs.

The Jakarta Initiative has hired several foreign debt restructuring experts to help in the often difficult and complex negotiations.

But critics have said the huge cost of the Jakarta Initiative is unjustified, because the task force is ineffectual and painfully slow in reaching debt restructuring deals.

Jakarta Initiative chief operating officer Joseph Luhukay defended the task force, saying that private sector debt was extremely complex, involving numerous creditors with various interests.

The executive secretary of the private sector debt restructuring team, Irzan Tanjung, acknowledged that people were growing increasingly impatient with the sluggish progress of the debt restructuring program.

"Resolving private debt takes time, and please note that (the help of the Jakarta Initiative) is voluntary ... so it's slow," Irzan said.

Joseph said 284 companies with an outstanding total debt of $23.2 billion and Rp 15.6 trillion had enlisted the aid of the Jakarta Initiative. Of this number, 27 firms with an outstanding total debt of $3.3 billion and Rp 2.3 trillion have reached debt restructuring agreements.

The president of PT BII Finance Center, a unit of Bank International Indonesia, Artine S. Utomo, praised the work of the Jakarta Initiative. She said the task force helped her company restructure more than $62 million in syndicated loans owed to 18 banks.

"Debt negotiations are extremely difficult. They really can come to a deadlock; it's unavoidable," she said.

She said that as a neutral party, the Jakarta Initiative was able to restart stalled negotiations with creditors.

Publicly listed heavy equipment manufacturer PT Intraco Penta also acknowledged the importance of the Jakarta Initiative Task Force in resolving the deadlocked negotiations over its $44.17 million in debt. (rei)