FSPC OKs restructuring of $93.07m in corporate debt

JAKARTA (JP): The Financial Sector Policy Committee (FSPC) has approved the restructuring of some US$93.07 million in debt owed by two companies to foreign creditors and the Indonesian Bank Restructuring Agency (IBRA), according to a media statement issued by the committee on Monday.

The FSPC said that the debts were owed by plywood exporter PT Sumatra Timber Utama Damai (STUD) and by granite mining company PT Pacific Granitama.

The committee, which comprises several senior economic ministers and has the final say on the major corporate debt restructuring program, said that the Jakarta Initiative Task Force (JITF) had facilitated the debt restructuring process.

JITF is a government sponsored agency with a mandate to help expedite the corporate debt restructuring process in the country. So far the agency has facilitated the restructuring of around $10 billion in corporate debt, with an end of April target of $12 billion.

STUD owes around $75.5 million in debt to foreign creditors and IBRA, of which around $27.8 million is owed to the latter, a unit of the finance ministry which took over the debt from troubled and closed down domestic banks.

Under the approved debt restructuring plan, the debt would be repaid in 5-7 years with an annual interest rate of 3.5 percent above the Singapore interbank offering rate (Sibor), the FSPC said.

The committee added that the shareholders of STUD were required to provide a personal guarantee for its debt to IBRA.

Meanwhile, FSPC said that Pacific Granitama, which has a mining site on Riau's Karimun Island, owed around $17.37 million in debt, including $5.98 million to IBRA.

The committee said that under the restructuring scheme, the principal of the debt would be repaid every four months until the end of December 2008, with an interest rate of 3 percent above Sibor for onshore lenders.

It said that the interest rate would be recalculated with an annual interest rate of 10 percent, of which around $750,000 would be repaid up front upon the signing of the debt restructuring agreement, while the remainder would be repaid within one year, starting from December 31, 2007.

The committee added that the shareholders of the company were also required submit personal guarantees.

The FSPC said that with regard to irregularities revealed as a result of a recent financial and legal due diligence audit, the government would take the necessary legal action against existing and former shareholders, and company top management. The committee did not provide details.

The restructuring of the country's massive corporate debt is a crucial factor to help revive investor confidence in the ailing economy. But many have criticized that the progress of the debt restructuring has been slow.

Elsewhere, FSPC said that between the period September 2000 to April 2001, the committee had processed and approved the restructuring of some Rp 49.71 trillion in debt owed by IBRA's top 51 debtors, of which 38 debtors had signed MoU agreements concerning a total debt of around Rp 23.4 trillion, and 11 debtors had signed final restructuring agreements covering a total debt of around Rp 12.77 trillion.

The committee also said that the corporate debt restructuring total was "twice" what was hammered out by the previous economic team between January and August 2000. (rei)