Government approves debt restructuring for Chandra Asri

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)