Depressed debt task force receives boost from debtors

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)