FSPC sets new guidelines for corporate restructuring

JAKARTA (JP): The Financial Sector Policy Committee (FSPC) has set new guidelines for future corporate restructuring deals under the Indonesian Bank Restructuring Agency (IBRA) in a bid to improve transparency and accountability.

FSPC said in a media statement that new debt restructuring guidelines were made following consultation with the International Monetary Fund (IMF) and the World Bank.

The committee said that all restructuring plans must be based on business feasibility by taking into account cash flow projection.

"The sustainable debt is restructured based on market conditions, while unsustainable debt is converted into quasi- equity and equity. For the equity portion, IBRA or IBRA in addition to other creditors will take a majority position," it said.

"The original owners (of the indebted companies) must provide a personal guarantee on the (restructuring of the) unsustainable debt portion and the quasi-equity owned by IBRA," it added.

FSPC also said that it would explain the rationale behind any debt restructuring plan, and that an oversight committee would review restructuring deals worth Rp 250 billion (US$24 million) or more.

FSPC groups several senior economic ministers led by Coordinating Minister for the Economy Rizal Ramli. The committee has the final say on major restructuring deals made by IBRA.

The agency has been criticized by many analysts, including the IMF and World Bank, over past restructuring deals which seem to favor indebted debtors and, in particular, large and well- connected business groups.

Elsewhere, the FSPC also said that it had approved the debt restructuring of Asia's largest integrated shrimp producer PT Dipasena Citra Darmaja and timber conglomerate Kalimanis Group.

FSPC said that under the restructuring deal, the owners of Dipasena would not have to repay its Rp 1.9 trillion debt to IBRA as previously demanded by the committee.

But in return the Dipasena owners must provide fresh capital to rehabilitate operations and as working capital for the shrimp farmers. Dipasena must also write off all the debts that the shrimp farmers owed the company

Dipasena operates under the so-called "core-plasma" scheme, in which the company acts as the nucleus to provide credit to shrimp farmers as the plasma but in return the farmers are required to sell their output to the company.

The FSPC said that it had also agreed to write off the interest charge of the farmers' debts worth around Rp 1.1 trillion as well as part of the principal debt.

Dipasena is owned by tycoon Sjamsul Nursalim. The company owes debt to IBRA, which took over the loan from ailing local banks.

The FSPC added that it had also approved the debt restructuring of eight companies belonging to the Kalimanis Group, controlled by timber tycoon Bob Hasan, owing Rp 623 billion plus $119.6 million in debt to IBRA.

The committee said that the repayment of sustainable debts of PT Jati Dharma, PT Jati Cahaya Cemerlang, and PT Lakosta Indah were rescheduled to 6-7 years, while that of PT Kalimanis Plywood Industries was stretched to a 10-year period.

It added that debts of the other four companies worth Rp 1.16 trillion were considered unsustainable and were put into a new holding company, which would later issue promissory notes backed up by the personal assets of Bob Hasan.(rei)