FSPC approves major corporate debt restructuring

FSPC approves major corporate debt restructuring

JAKARTA (JP): The powerful ministerial Financial Sector Policy
Committee (FSPC) said on Thursday that it had approved corporate
debt restructuring deals worth some Rp 189.7 trillion (US$18.9
billion) between 2000 and the end of March.

The FSPC said in a press release that the total value of the
debt workouts approved by the committee during the first three
months of this year alone was almost three times as large as
those concluded throughout last year.

"During the first three months of 2001 alone, the total value
of debt restructuring deals approved by the FSPC was Rp 141.04
trillion, or almost three times as large as those concluded
through all of last year," said Coordinating Minister for the
Economy Rizal Ramli.

Rizal chairs the FSPC which groups several senior economic
ministers, including the ministers of finance, and industry and
trade.

The Indonesian Bank Restructuring Agency (IBRA) is authorized
to decide on debt restructuring and asset sale deals worth only
less than Rp 1 trillion. Transactions worth Rp 1 trillion and
more must get prior approval from the FSPC.

The press release said that the corporate debt restructuring
deals approved by the FSPC were those processed by IBRA, the
Jakarta Initiative Task Force (JITF) and the state-owned Bank
Mandiri.

IBRA itself controls more than Rp 260 trillion worth of bank
non-performing loans (NPLs) it took over from nationalized and
closed banks.

The JITF is a government-sponsored agency set up to provide a
mediation process between debtors and creditors focusing
particularly on the restructuring of private sector overseas
debt. But debtors and creditors cannot be forced to join the JITF
mediation process because it is based on a voluntary approach.

Last year, the JITF managed to restructure around US$9 billion
in corporate debts.

The press release did not mention the reason why Bank Mandiri
had sought the approval of the FSPC in the restructuring of its
debtors, particularly as most of the bank's huge NPLs had been
transferred to IBRA.

The FSPC did not specify which of the approved restructuring
deals had finally been closed and which were based on provisional
MOUs (Memorandum of Understanding).

Rizal has repeatedly asserted that the FSPC is strongly
committed to accelerating the restructuring of the country's
massive corporate debt in a bid to help restore the ailing
economy.

The government has been criticized for the slow progress in
the corporate debt restructuring area.

The criticism has also been directed at the FSPC as some of
the deals were seen as more benefiting the debtors, particularly
big conglomerates, than the state.

Among of the critics were the International Monetary Fund and
the World Bank.

An IMF mission led by deputy director for Asia Pacific Anoop
Singh arrived in Jakarta earlier this week to start a review of
the country's key economic reform program with the government.
The review will include the corporate debt restructuring issue.

The mission will complete the review in about two weeks and
will report to Washington before the IMF decides on the
disbursement of its next crucial $400 million loan tranche to the
country.

The IMF promised early last year to provide a total of $5
billion in loans to the current administration to help finance a
three-year economic reform program. So far around $1 billion has
been disbursed.

The third loan-tranche disbursement was delayed late last year
due to signs that the government was wavering in the
implementation of key reform programs, including corporate debt
restructuring.

In a bid to appease the IMF, the FSPC recently issued a new
corporate debt restructuring ruling, which includes allowing the
oversight committee of IBRA to review all the restructuring deals
made by IBRA. (rei)