Euro bankers cautiously upbeat on RI debt plan

Euro bankers cautiously upbeat on RI debt plan

FRANKFURT (Dow Jones): German and Dutch bankers expressed cautious optimism about Indonesia's debt-restructuring plans Friday after attending the Frankfurt leg of a roadshow for the program.

"The initial indication is that the program will get a high percentage of participation, at least from banks that attended this session," a banker with Deutsche Girozentrale in Frankfurt told Dow Jones Newswires after the meeting.

However, he added, judging from the highly technical questions attendees asked during the meeting, "some (bankers) may require additional information before they are comfortable with all points of the plan."

Bankers exiting the meeting said many questions were raised about exactly how the new Indonesian Debt Restructuring Agency (INDRA) will protect Indonesia's currency -- an integral promise made in a debt-restructuring plan agreed to last month.

Indonesia and a steering committee of international creditors agreed June 4 to restructure $80 billion in foreign private debt, to alleviate pressure on the country's cash-strapped companies and shaky foreign-exchange market.

According to a joint statement issued by the two groups back then, INDRA would be formed "to provide exchange-rate risk protection and assurance as to the availability of foreign exchange to private debtors." The country's currency, the rupiah, has depreciated radically against the dollar in recent months.

Since the June agreement is voluntary for both Indonesian debtors and their foreign lenders, high-level government and debt-committee representatives are marketing the deal in six major cities worldwide to drum up membership. Frankfurt was the third stop on their global tour.

Ninety bankers from "several European countries" attended Friday's meeting, a spokesman for Deutsche Bank said. Officials of the Deutsche Bundesbank and the International Monetary Fund also were present.

All three parts of the June agreement were discussed in Friday's meeting, bankers said. The package is aimed at restructuring about $8 billion to $9 billion in bank debt, $64 billion in corporate debt and an additional $7 billion in trade- financing arrangements.

Some attendees of the roadshow's Paris leg a day earlier had expressed concerns about whether the corporate-debt portion of the plan can work. But both German and Dutch bankers in Frankfurt Friday disagreed with that sentiment.

"We have a lot of details to work out in the coming weeks and will need to talk about any corporate debt write-offs, if they are necessary, on a case-by-case basis," said one Dutch banker who attended the meeting. "But there is no concern that this portion of the agreement would need to be reworked."

A banker for Frankfurt-based SGZ-Bank AG added that "it's logical" that bankers would pose more questions about the corporate debt portion "because it's a much larger amount of the overall debt" that needs to be restructured.

He did concede that he may be less concerned than others for a specific reason. "Thank God, we don't have any corporate debt," he explained.

SGZ plans to sign on to the restructuring agreement for the U.S.-dollar denominated bank debt it has outstanding in Indonesia, he added.

Banks have been given until July 23 to review the materials presented and decide whether to sign on to the program, according to the banker.