FSPC completes Chandra Asri's debt restructuring

FSPC completes Chandra Asri's debt restructuring

JAKARTA (JP): The Financial Sector Policy Committee (FSPC) has finalized the debt-restructuring plan for troubled petrochemical giant PT Chandra Asri.

FSPC said in a statement that Chandra Asri's foreign creditors, led by Japanese Marubeni Corp., must accept the final restructuring plan or the Indonesian Bank Restructuring Agency (IBRA) would have to settle the debt problem via legal processes.

Under the plan, Chandra Asri's US$700 million debt to Marubeni would be repaid in 15 years with an interest rate of 1.5 percent above the London interbank offering rate (Libor). IBRA would also become a creditor with total exposure of $50 million.

"If Marubeni rejects the above restructuring (plan), then IBRA will be asked to settle Chandra Asri's obligation via legal mechanisms," said FSPC, which groups several senior economic ministers and approves the country's major corporate restructuring deals.

The restructuring of Chandra Asri's debt has become a controversial issue after Marubeni continued to insist that IBRA implement an earlier restructuring plan agreed in November last year.

Under the initial plan, Marubeni would become the single creditor of Chandra Asri, while IBRA would convert all of its Rp 3 trillion loan ($288 million) into an 80 percent equity at the petrochemical firm. Marubeni would only convert $100 million of its lending into a 20 percent equity.

But experts said that IBRA, which is a unit of the finance ministry, would become liable to Chandra Asri's future obligations if it holds an 80 percent equity in the company.

It is not clear, however, how much of Chandra Asri's stake would be held by IBRA under the new restructuring plan.

IBRA took over the Rp 3 trillion loan from ailing domestic banks. IBRA is mandated to restructure the loan.

Marubeni agreed earlier to lower the debt's interest rate from 2.5 percent above Libor to 1.5 percent above Libor.

But the government initially wanted to reduce the interest rate to zero plus Libor.

In February, Marubeni also agreed to stretch the tenor of the debt to 15 years from the initial 12 years tenor, as demanded by the government.

But the Japanese creditor has continued to reject the government's demand for IBRA to also become a creditor of Chandra Asri.

The government has demanded that both IBRA and Marubeni hold an equal stake at Chandra Asri.

The restructuring of Chandra Asri's debt is one of the major debt-restructuring programs that the government is eager to complete in a bid to revive investor confidence in the ailing economy.

But sources said that Marubeni had rejected any proposal for a higher equity at Chandra Asri because it would mean that the Japanese firm would have to provide extra cash for Chandra Asri, which is now considered a risky investment.

Reports said earlier that IBRA chairman Edwin Gerungan had been under pressure to accept the debt-restructuring proposal made by Marubeni.

But Edwin threaten to resign from IBRA if the agency was forced to accept Marubeni's plan.(rei)