Government approves debt restructuring for Chandra Asri
JAKARTA (JP): The government said on Friday that it had approved a debt restructuring deal for the petrochemical giant PT Chandra Asri under which businessman Prajogo Pangestu would get a 49 percent stake, the government 31 percent and Japan's Marubeni Corp., 20 percent in the company.
A meeting of the Financial Sector Policy Committee (FSPC) decided on Wednesday that Prajogo through his company PT Inter Petrindo Inti Citra (IPIC) would take over $638.6 million of Chandra Asri's foreign debts and Rp 120 billion of its local debts.
The government would hold its 31 percent stake through the Indonesian Bank Restructuring Agency (IBRA), FSPC said in a press release.
The FSPC, comprising senior economic ministers, is in charge of approving IBRA's major corporate and bank restructuring deals.
Chandra Asri owes $700 million to Japanese creditors and some Rp 3 trillion to domestic banks that are under IBRA's supervision.
Under pressure from the Japanese creditors, the government initially agreed to take an 80 percent stake in the company with Marubeni, as the leader of the Japanese creditor consortium, holding the remaining 20 percent.
However, when the public decried the agreement as a bailout scheme for the conglomerate, the government changed its mind.
Analysts have said that by taking 80 percent of Chandra Asri, the government could leave itself liable for any future debts of the company.
"All $800 million worth of shares of PT Chandra Asri owned by the Indonesian founding shareholders will be transferred to IPIC under Prajogo's ownership," FSPC added.
According to FSPC, Prajogo's 49 percent stake in Chandra Asri is worth $800 million, for which he will issue convertible bonds in the same amount to IBRA.
The bonds are convertible to IPIC shares and carry an annual interest rate of six percent for a period of 12 years.
IPIC will guarantee the bonds with its shares in Chandra Asri as well as PT Tripolyta, and its assets in the form of shares and lands of Panca Puri.
Prajogo must also submit additional assets as collateral, including his shares in PT Tanjung Enim Lestari, PT Barito Pacific Timber and in other companies.
FSPC has required Prajogo to submit the assets and shares within one week after the debt restructuring agreement is made.
The committee has also required Prajogo to surrender personal property as additional collateral.
"If according to an evaluation by an independent appraiser, Prajogo's guarantee for the bonds other than IPIC's stake in Chandra Asri, does not cover the nominal value of the bonds, Prajogo will be obliged to cover the shortfall," FSPC said.
Under the deal, the government and Prajogo will ask Marubeni to lower its debt rates from the current rate of 2.5 percentage points above the London Interbank Offer Rate (Libor) to a level similar to the Libor rate, while extending the repayment period from the present 12 years to 15 years.
The government will also ask Marubeni to raise its ownership in Chandra Asri from its current debt-to-equity deal worth $100 million.
"The shareholders of Chandra Asri (IBRA, Prajogo, and Marubeni) are given a maximum of three months to finalize the negotiation process, which IBRA will then report to the FSPC," the committee said.
The government also asked Marubeni to help Chandra Asri find working capital, extend its production capacity and allow Chandra Asri to find buyers and suppliers other than Marubeni to reduce its dependence on the Japanese company.
Because of the sensitive issue of the exact ownership of Chandra Asri, the government has delayed the debt restructuring deal several times.
The country hopes that a restructuring of its corporate sector will create enough investor confidence to enable domestic banks to resume lending to the real sector. (bkm)